Govt asks banks to expedite NPA resolution, focus on credit growth

New Delhi: The Finance Ministry held a meeting with heads of public sector banks (PSBs) on Monday to review their annual performance, NPA resolution and progress made by them on various government schemes. The meeting was scheduled to be chaired by Finance Minister Nirmala Sitharaman, but she could not attend due to some other pressing engagement.

However, the annual performance review of PSBs was chaired by Minister of State (MoS) for Finance Bhagwat K Karad. Besides the minister, Financial Services Secretary Sanjay Malhotra and other senior officials of the Department of Financial Services (DFS) were present at the meeting.

According to sources, banks were asked to sanction loans for productive sectors to accelerate the revival of the economy facing headwinds, including from the Russia-Ukraine war.

During the Iconic Week celebration of the finance ministry earlier this month, banks conducted outreach programmes across the country where eligible borrowers have sanctioned loans on the spot.

Banks have been asked to expedite NPA (non-performing assets) resolution and focus on the recovery of bad loans, the sources said.

The meeting took a stock of credit growth, asset quality and business growth plan of banks, sources said, adding NPA of Rs 100 crore and the recovery status were also discussed.

There was a comprehensive review of various segments and progress in the government schemes, including the Kisan Credit Card and Emergency Credit Line Guarantee Scheme (ECLGS).

In the Budget, the ECLGS was extended by a year till March 2023. Further, the guarantee cover for the scheme was expanded by Rs 50,000 crore to Rs 5 lakh crore.

The coverage, scope, and extent of benefits under ECLGS 3.0 for hospitality, travel, tourism, and civil aviation sectors were expanded.

Also, the credit limit for eligible borrowers was increased to 50 per cent of their fund-based credit outstanding from 40 per cent earlier. The enhanced limit is subject to a maximum of Rs 200 crore per borrower. Besides, the sources said, the review of capital requirements of banks and the financial inclusion drive were part of the agenda.

It is to be noted that the meeting was held against the backdrop when all PSBs posted a profit in the second financial year in a row. They have more than doubled their net profit to Rs 66,539 crore in FY22. The collective profit of 12 state-owned banks together was Rs 31,820 crore in FY21.

However, there were collective losses for five straight years during 2015-16 to 2019-20. The highest amount of net loss was registered in 2017-18 at Rs 85,370 crore, followed by Rs 66,636 crore in 2018-19; Rs 25,941 crore in 2019-20; Rs 17,993 crore in 2015-16 and Rs 11,389 crore in 2016-17.

To improve the financial health of PSBs, the government implemented a comprehensive 4Rs strategy — recognition of NPAs transparently, resolution and recovery of value from stressed accounts, recapitalization of PSBs, and reforms in PSBs and the wider financial ecosystem — for a responsible and clean system.

Comprehensive steps were taken under the 4Rs strategy to reduce NPAs of PSBs.

As part of the strategy, the government has infused Rs 3,10,997 crore to recapitalise banks during the last five financial years — from 2016-17 to 2020-21, out of which Rs 34,997 crore were sourced through budgetary allocation and Rs 2,76,000 crore through issuance of recapitalisation bonds to these banks.

(With agency inputs)

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