Money & Banking

Appraise loan proposals without any fear or favour: Finmin to banks

Shishir Sinha New Delhi | Updated on November 20, 2014

The Finance Ministry has told public sector banks to appraise lending proposals without any “fear or favour’’.

It also hopes that the ratio of bad debts (technically known as Non Performing Assets or NPAs) to advances will come down with improvement in the economy.

Credit growth

These remarks have come at a time when credit growth in the first six months of the current fiscal has slipped to 9 per cent from 18.8 per cent in the last fiscal.

Similarly, the ratio of gross NPAs to gross advances has surged to 5.32 per cent at the end of September 30, 2014 against 4.82 per cent in the same period last fiscal. Another issue is related with State Bank of India’s MoU with Adani group for a loan of $1 billion.

The Finance Minister, Arun Jaitley, today chaired a quarterly review meeting of public sector banks. “We have suggested to the banks proactive steps in supporting various projects, so that credit offtake with regard to these projects picks up in a big way. Of course, the banks are conscious of their responsibility,” Jaitley told reporters after the meeting.

The meeting was attended by the heads of public sector banks and financial institutions.

Rising bad loans

When asked about rising NPAs, the Minister said that over the last two to three years, on account of slowdown, one area of concern is that the NPAs have risen and “therefore what proactive steps to be taken to ensure NPAs come down have been discussed’’.

However, he did not give much detail about the new measures.

Later, giving brief details about the proceedings of the meeting, a senior Finance Ministry official termed NPA as a legacy issue and claimed that things will change now.

“It has happened because of a number of reasons. For the last 2-3 years, there were no good projects coming up. So, when the total asset size does not increase, naturally your percentage of NPAs will go up. These are all legacy issues. Now, when economy looks up, when new portfolio is generated by banks, these percentages will start coming down,” he said.

He mentioned that banks have been told to “go ahead and do your appraisal without fear or favour from anybody. We are saying that to do it objectively, do it professionally and so once quality of lending improves, this issue of NPA should not remain.”

Jan Dhan Yojana

There was a separate meeting on Pradhan Mantri Jan Dhan Yojana for financial inclusion, during which progress made till now and the ways ahead were ahead.

One of the major issues is that out of 7.46 new accounts opened so far, almost 2/3rd are with zero balance or dormant account, but the Finance Ministry and banks are hopeful that things will improve with the transfer of direct benefit through bank account.

Published on November 20, 2014

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