Wilful defaulters from the corporate world may have to face a change in management if they fail to repay loans, the Finance Ministry warned on Tuesday.

On account of mounting bad loans or non-performing assets (NPAs), public sector banks have set aside around ₹90,000 crore from their earnings as provisions, and this is affecting their profitability.

As of March 2014, bad debts as a percentage of total advances stood at 4.44 per cent against 3.84 per cent at the end of March 2013. Although the bad loan situation improved in the January-March quarter from 5.07 per cent in December 2013, NPAs are still at a nine-year high.

“There will be tough action against wilful defaulters, which can include even a change of management, because so much money is stuck,” said Financial Services Secretary GS Sandhu after the annual review of public sector banks on Tuesday.

(This article was published on May 13, 2014)
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