“If there is a headache, one cannot just cut off the head,” said the Finance Minister, Mr Pranab Mukherjee, intervening during a reply to a Parliamentary question on bad loans of banks.

He said that public sector banks (PSBs) would have to take care of the non-performing assets (NPA) situation even while following a “balanced approach” to lending.

“I recently told the chief executives of PSBs that they should not choke credit. At the same time, they should do due diligence while sanctioning loans,” Mr Mukherjee told the Lok Sabha today. He also admitted that NPAs have in the last three years been on an “upward trend”.

The Finance Minister assured the Lok Sabha that the Government was “always vigilant” on NPAs. Mr Mukherjee cautioned that policymakers should not do anything that would discourage bankers from taking risks and extending credit to the needy.

Noting that the Indian banking system had remained largely unaffected by the global financial crisis of 2008, he pointed out that the story was completely different for large banks in the developed markets. “The taste of the pudding is in the eating. We all saw how big banks all over the world collapsed like pack of cards (after the global financial crisis of 2008),” he said.

Mr Namo Narain Meena, Minister of State for Finance, told the Lok Sabha that although NPAs had seen a rising trend over the last three years, there was no cause for concern.

“Public sector banks' performance has been good compared to private sector banks. NPAs are under control for public sector banks. In fact, NPAs as percentage of advances have fallen when you compare it with the situation in 1998, 2000 or 2003-04,” he said.

Mr Meena, however, admitted that NPAs were on the higher side, at over 3 per cent, in respect of two banks – State Bank of India and UCO Bank.

Gross NPAs of SBI have gone up from Rs 15,000 crore in end March 2009 to Rs 17,000 crore in end March 2010 and to 23,000 crore in end March 2011.

>krsrivats@thehindu.co.in

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