Be vigilant to check NPAs; don't choke credit: FM to banks

Source :PTI:Fri, Aug 05, 2011 at 16:25

Concerned over rising Non- performing Assets (NPAs) of public sector lenders, Finance Minister Pranab Mukherjee today said banks must tackle the problem seriously but without choking credit.

"NPAs in public sector banks have witnessed an upward trend. I had a meeting with chiefs of these banks and drew their attention. I asked them to take care of it. I told them not to choke credit but apply due diligence while sanctioning loans," he told the Lok Sabha during Question Hour.

The gross NPAs of the public sector banks have risen to Rs 78,119 crore as on June this year compared to Rs 44,039 crore in March 2009.

Mukherjee also asked the banks to follow a balanced approach and said there should not be any undue delay in sanctioning of loans.

He assured the House that Indian banking system was strong. "We have seen how the big banks in the world have collapsed (2008) like pack of cards, but Indian banks survived".

This doesn't mean that NPAs should be allowed to rise. "We are always vigilant. But we should not do anything wherein banks start refusing loans to needy," he said.

Expressing concern, Members said the NPAs were rising due to various factors like lack of proper due diligence while giving loans to firms and also rising interest rates.

Meanwhile, replying to a supplementary, Minister of State for Finance Namo Narain Meena said that risk management system has been strengthened and all possible precautions are being taken while sanctioning loan.