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Bank bad asset scare for ECGC

Calcutta, Dec. 20: Rising bad assets of banks have become a cause for concern to Export Credit Guarantee Corporation of India (ECGC), which offers insurance guarantees to banks and financial institutions on loans by exporters.

The state-run insurer plans to make a provision for about Rs 1,000 crore claims, which may put pressure on its operational profit this year.

“This year is going to be difficult. Two-third of our business is insuring bank’s export credit. We have seen this year how exports are moving and there are lots of delinquencies, CDRs, restructuring,” Geetha Muralidhar, executive director of ECGC, said on the sidelines of a seminar on export risk management organised by ECGC and Dun & Bradstreet.

On how rising bad loans are taking a toll on the insurer, Muralidhar said, “If exporters take credit and don’t repay, we have to pay claims to banks. Trend so far this year is pretty bad. The NPA rates have risen from 2 per cent to over 4 per cent.”

According to research firm Icra, the gross NPAs of 26 public banks are set to touch 4.8-5 per cent of total advances by the end of this fiscal. It has slightly moderated to around 3.6 per cent in the second quarter from 4.2 per cent in the first quarter of 2013-14.

In a discussion paper, the RBI has proposed measures such as incentives to banks for tackling doubtful accounts in a timely manner.

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