New Delhi, Aug. 21: Prime Minister’s key economic adviser C. Rangarajan today indicated banks might have to deal with higher non-performing assets (NPAs) on account of the weak economy.
“NPA also increases because of the way economy behaves. If the rise in bad loans is beyond the control of banks, banks need to be very careful in identifying NPAs,” Rangarajan said.
He was speaking at the 5th Conference of Central Bureau of Investigation (CBI) officials and Central Vigilance Officials (CVOs) of public sector banks.
“While judging increasing NPAs, banks should also take the note of what is happening in the environment. Some amount of loan can for a time become NPA,” he said.
NPAs have been going up for the last two years because of the slowdown in the economy. The gross NPAs of some public sector banks, including the State Bank of India and Punjab National Bank, have crossed 4 per cent of the total assets at the end of March 2013.
Pulled down by poor performance of farm, manufacturing and mining sectors, the Indian economy slowed to a 4.8 per cent growth rate in the January-March quarter of the last fiscal and fell to a decade’s low of 5 per cent for the entire 2012-13.
NPA of public banks rose to Rs 1.76 lakh crore at the end of June quarter from Rs 1.55 lakh crore in March 31.
According to global rating agency Standard & Poor’s, India’s banking sector’s NPA ratio is likely to surge to 3.9 per cent of total loans in 2013-14 and to 4.4 per cent in 2014-15 compared with 3.4 per cent in 2012-13.
Recently, minister of state for finance Namo Narain Meena, in a written reply in the Rajya Sabha, said the NPAs of banks had shown a rising trend. The stress on the asset quality is a reflection of the stress in the economy of the country.