The Telegraph
Tuesday , February 11 , 2014
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FM glare on wilful defaulters

P. Chidambaram in New Delhi on Monday. (PTI)

New Delhi, Feb. 10: Finance minister P. Chidambaram today directed banks to take stern steps to recover loans from wilful defaulters.

“We cannot show laxity to wilful defaulters. It cannot be where loans will become non-performing, the borrowers prosper and the lenders suffer,” he said at the 78th foundation day of the Indian Overseas Bank here.

Chidambaram asked banks to “identify the wilful defaulters, take stern steps to recover loans from wilful defaulters even while helping others who are genuinely caught in the business downturn to recover so that they can pay the loans in course of time”.

Non-performing assets (NPA) of public sector banks rose 28.5 per cent to Rs 2.36 lakh crore in September last year from Rs 1.83 lakh crore in March 2013.

Total NPAs had gone up to Rs 1.37 lakh crore in March 2012 from Rs 94,121 crore in the same month a year ago. The amount of NPAs in September 2013 has more than doubled since March 2011.

Rating agency Standard & Poor’s (S&P) has warned that despite a likely upward movement in the country’s growth, the asset quality and profitability of Indian banks are likely to remain subdued in the next 12 months.

“We expect weakness in banks’ asset quality to persist for the next 12 months because the economic recovery is likely to be tepid and it will take time for the domestic industry to recover and corporate balance sheet leverage to decline,” S&P credit analyst Amit Pandey said in a note.

Last month, the RBI released a “Framework for Revitalising Distressed Assets”, which proposes to allow lenders to spread the loss on the sale of such assets over two years provided the loss is fully disclosed, among others.

Chidambaram said the government had infused a significant amount of capital in banks over the past few years.

The government injected Rs 12,000 crore in 2011-12 and Rs 12,517 crore in 2012-13. In the current fiscal, it has allocated Rs 14,000 crore.

The finance minister said “humongous” capital would be required in the future, and banks have to find their own capital by retaining their profits for capital infusion.

He said banks infused about Rs 35,000 crore from their retained earnings in 2011-12 and Rs 37,936 crore in 2012-13.