press trust of india, New Delhi, June 11: Reserve Bank Thursday made a case for developing better strategies to deal with the problem of bad loans as hiding them would aggravate the situation for the banks as well as borrowers.
“An account becoming NPA is not a sin. The time has come that it would be a better strategy that if there is a weakness in the account…rather than postponing, hiding the problem either on the part of banks or borrowers; it is important that the bank recognises NPA then extend a helping hand (to borrowers),” RBI Deputy Governor S S Mundra told reporters here.
Stressing that there is no regulation in the world that prohibits “rehabilitation” of NPAs, he said, “If exposure is too big, bank is in a weak position. If exposure is small then the borrower is at weak position. In either of the situation one of the parties will be in a weak position.
“…once you declare an NPA then the realities are known and both the parties can sit across the table and workout a support plan which is more realistic and which is likely to succeed.”
As of December 2014, gross NPAs of PSU banks were at Rs 2,60,531cr or 5.6 per cent of the total advances. The top 30 defaulters are sitting on bad loans of Rs 95,122cr, which is more than one-third of the entire NPAs of public sector banks. It amounts to 36.50 per cent.
RBI seeks more funds for recapitalisation of banks
The Reserve Bank Thursday said Rs 7,940cr earmarked for recapitalisation of PSU banks in the current fiscal is not adequate and has asked Finance Ministry to increase the quantum of assistance in view of mounting bad loans and to support growth.
“We have been suggesting to the Finance Ministry from time to time that the public sector banks need more capital than what budget has indicated. So, we have been raising this issue at various discussions and forums and it was also formally written by Reserve Bank of India,” RBI Deputy Governor S S Mundra said here.
