Concerned over defaults by big borrowers, Finance Minister P. Chidambaram on Tuesday said the government is monitoring the top 30 NPA accounts in each PSU bank and asked the lenders to set up separate verticals to recover money from written-off accounts.

Talking to reporters after meeting the heads of PSU banks, the minister said he hoped that non-performing assets (NPAs) are a “function of economy” and would improve with the recovery in economic growth.

“We are monitoring the top 30 NPA accounts in each bank, each zone. It is a matter of concern that it is the big borrowers (with loans of over Rs 1 crore) who are defaulting,” Mr. Chidambaram said.

The minister said the situation was not as bad as it was in 2000, when gross NPAs touched a high of 14 per cent. The NPAs, which plateaued over the years at about 2 per cent, have started creeping up with the deceleration in growth in the past few years.

As of June, the gross NPA of nationalised banks was 3.89 per cent and State Bank Group at 5.50 per cent.

Mr. Chidambaram said that like the State Bank of India (SBI), other PSU banks should set up separate verticals to recover as much as possible from accounts that were written off.

Growth in banking sector

The minister, however, expressed satisfaction over credit growth by PSU banks in the first and second quarters of the current financial year and expressed hope that it will remain “satisfactory” in the remaining part of the fiscal.

Mr. Chidambaram said housing loans recorded a healthy growth in the first and second quarters and rose by 42 per cent and 61 per cent, respectively.

Growth was also observed in education loans, he said, adding that banks have been asked to meet the lending target with regard to minorities.

The minister said PSU banks will open 10,000 new branches and set up 34,668 on—site ATMs during the course of the current financial year.

Ban on gold import to continue

Referring to the current account deficit (CAD), Mr. Chidambaram said the government does not intend to lift the ban on gold coins and medallions.

The government had imposed restrictions on import of gold with a view to contain the CAD, which widened to an all—time high of 4.8 per cent of GDP in 2012-13. In the current fiscal, GDP is expected to narrow to below 3.7 per cent of GDP. 

Non-performing assets

Elaborating on NPAs, Mr. Chidambaram said it is a “function of the slowdown in the economy...In the year 2000, NPA was 14 per cent...gross NPAs came down to a low of 2.09 per cent in 2008—09. Since then, it was flat for two years and then the slowdown pinched and it slowly started creeping up. It is not a sharp rise — it is a rise still and this is what is a matter of concern.”

Observing that there were some wilful defaulters, Mr. Chidambaram said, “The bulk of the people do not wilfully default. They default because of circumstances. Once the economy and cash flow pick up, they will pay.”

The bulk of the NPA was from those who borrowed Rs 1 crore and more, he said, adding, “We have told them (PSU banks) to keep a very close watch on these largest accounts and have to recover the amount...recoveries are taking place, but not as much as I would like...I hope recoveries will improve.”

Noting that defaulters often try to stop the recovery process, he said, “Banks have been advised to empower or set apart an officer of senior rank, at least of General Manager rank, to look at recovery, especially recovery from written—off accounts...We will try to recover as much as possible from the written—off accounts.”

The banks, he said, can look to establish a separate vertical, as was done by SBI, to improve recovery from such written—off accounts. (The Hindu)