Amid rising concerns over the increasing non-performing assets (NPAs) of the Indian banking industry, Finance Minister P Chidambaram asked public sector banks to focus on recovery of bad loans. Finance Minister held the 'Quarterly Performance Review Meeting' with the CEO’s of state owned banks on February 5 and discussed about the rising bad loans, measures needed for the recovery, ways to raise additional Tier I capital and capital infusion in PSU banks.
Highlighting NPAs and asset qualities as the biggest challenges for public sector banks, Chidambaram pointed out that NPAs were high in large corporate sectors and small industries. However, the credit disbursal to medium- sized industries has declined and was only satisfactory for the agricultural sector. NPAs or bad loans of PSU banks rose by 28.5 percent to Rs 2.36 lakh crore in September’ 2013 from Rs 1.83 lakh crore in March, 2013. Meanwhile, the banks recovered Rs 18,933 crore worth of bad loans during the April-December’2013 period. Regarding the capital infusion in PSU banks, Finance Minister stated that the government will provide more funds to banks if it mobilizes higher resources.
Rising NPA levels have become an issue for growth of the banking industry, which is the most dominant segment of the financial sector and plays an important role in the economic development of the country. Banks help to channel savings into investments and encourage economic growth by allocating savings to investments that have potential to yield higher returns.