Be vigilant on NPAs, Pranab tells PSBs

                                  
Banks asked to promote electronic mode of transactions

Finance Minister Pranab Mukherjee, on Tuesday, directed public sector banks (PSBs) to keep up the momentum of bringing down their non-performing assets (NPAs) and be vigilant in this regard to ensure sound financial health of the country's banking system.

Lauding the PSBs for reduction in gross NPAs from the level of 3.18 per cent in December, 2011, to 3.10 per cent in March this year, Mr. Mukherjee said: “I am happy that banks have taken up the challenge to reduce NPA's ...This momentum now has to be kept up and timely action in this direction would ensure sound financial health of the banking sector.”

Addressing chief executives of PSBs and financial institutions at a meeting for performance review of last fiscal, the Finance Minister expressed satisfaction over the banks ‘very proactively' responding to measures aimed at avoiding NPAs and pointed to recent decisions on restructuring of loans extended to textile units and distribution companies (discoms) in the power sector as good examples of NPA management. “I urge you to deploy various tools at your command for containing and rolling back NPAs in accordance with the guidelines of the Reserve Bank of India,” he said.

As a proactive step to help these sectors, which are under stress owing to the economic slowdown, bank loans totalling about Rs.1.30 lakh crore to discoms and Rs.35,000 crore to the textile units are in the process of being restructured so that these sectors can obtain fresh loans.

Reviewing the performance of the lending companies during the fiscal, Mr. Mukherjee drew satisfaction from the fact that while PSB deposits grew by 14.4 per cent to over Rs.50 lakh crore in 2011-12, advances also went up by 17.7 per cent to over Rs.40 lakh crore on a year-on-year basis. Alongside, the banks' net profits rose from Rs.44,900 crore to over Rs.49,500 crore during the year even in the wake of a difficult economic scenario. As for credit to the farm sector, the PSBs had been set a target of Rs.5.75 lakh crore for 2012-13, which is achievable as loans to the sector exceeded Rs.5 lakh crore during the previous fiscal year.

For the current fiscal, the Finance Minister has asked the PSBs to pay special attention to ensuring that every farmer household receives a Kisan Credit Card and existing accounts are quickly replaced by debit cards under the new scheme.

While asking the RRBs (regional rural banks) to undertake coordinated branch expansion with their sponsor banks and start rolling out of ATMs and issuance of credit cards, Mr. Mukherjee also told the PSB chiefs to promote electronic mode of transactions over other modes. “They should examine the possibility of making NEFT transactions up to Rs.1 lakh free of charges, as has been done by Oriental Bank of Commerce,” he said.

In this regard, he asked the Reserve Bank of India (RBI) to proactively work on this front and ensure that all electronic banking transactions are made possible without any charges being levied. “The use of debit cards to the point of sale without any transaction charges at least for micro and small transactions should be our next objective,” he said.