| NPAs not a systemic issue, says RBI |
Press Trust Of India / Mumbai May 30, 2012, 00:24 IST
Deputy governor of the Reserve Bank of India (RBI) Anand Sinha on Tuesday said burgeoning non-performing assets (NPAs) in the banking system was not a systemic issue but only a reflection of the economic stress being faced.
“Whenever there is stress on the economy, both global and Indian, that is bound to reflect on the banking system. But I will not call it a systemic issue,” Sinha told reporters on the sidelines of a conference here.
His comments come a day after Finance Minister Pranab Mukherjee said NPAs had grown at “an uncomfortable and unacceptable rate” in the past two years and asked banks to tread cautiously because of the risks involved.
The NPAs of public sector banks grew by a percentage point to about 3.3 per cent of the assets in 2011-12, as against 2.3 per cent a year ago.
Several companies are opting for corporate debt restructuring to tide over the difficult financial situation in the backdrop of the slowdown. Aviation, state electricity boards, textile, telecom infrastructure and steel are among the sectors reporting stress.
RBI had held a meeting with the top brass of banks last month to take stock of the situation and suggest ways of dealing with the issue.
On depreciation of the rupee and on whether RBI was considering opening a special window for oil importers, Sinha refused to give a direct answer.
“All options are open. Whatever is there on the table, how can we close down an option? But I cannot comment on what has been done or what will be done,” he said.
When asked about the timeline for issuing new bank licences, Sinha said the central bank was waiting for the necessary amendments to the banking regulations being passed by the government.
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Forget Mussoorie, hold meets at HQ: FM to PSBs
NEW DELHI: State-run bank executives are the first victims of a fresh round of austerity drive that finance minister Pranab Mukherjee warned about in Parliamentlast week.
His ministry has sent a circular to all public sector banks, directing them to hold their board meetings at their headquarters and not at tourist destinations.
"It was brought to our notice that banks hold their meetings in tourist destinations such as Goa or at hill stations on the pretext of interacting with the local staff," said a finance ministry official.
Interestingly, the diktat to state-run banks comes at a time when the board of the Reserve Bank of India is meeting at Mussoorie.
In its circular, the ministry has told banks that a lot of expenditure is incurred on airfare, boarding, lodging and local transportation for offsite meetings, and that it is completely avoidable in the current economic situation.
Such board meetings are usually followed with other meetings for two-three days that too were found to be unnecessary, the official said.
The ministry's letter also encouraged use of videoconferencing for meetings between head offices and zonal or regional centres.
His ministry has sent a circular to all public sector banks, directing them to hold their board meetings at their headquarters and not at tourist destinations.
"It was brought to our notice that banks hold their meetings in tourist destinations such as Goa or at hill stations on the pretext of interacting with the local staff," said a finance ministry official.
Interestingly, the diktat to state-run banks comes at a time when the board of the Reserve Bank of India is meeting at Mussoorie.
In its circular, the ministry has told banks that a lot of expenditure is incurred on airfare, boarding, lodging and local transportation for offsite meetings, and that it is completely avoidable in the current economic situation.
Such board meetings are usually followed with other meetings for two-three days that too were found to be unnecessary, the official said.
The ministry's letter also encouraged use of videoconferencing for meetings between head offices and zonal or regional centres.
Even in board meetings, members not able to attend in person should do it through videoconference, the official said.
Last week, the finance minister had told Rajya Sabha that he would impose new austerity measures to respond to the tight economic situation and a weakening rupee. "...I am going to take a little bit of unpopular steps. I am going to issue some austerity measures...," he had said.
His ministry's new step indeed has not amused many bankers.
"Public sector banks do not have a culture of a corporate retreat which is followed in most multinational firms," said the chief financial officer of a state-run bank. The ministry's diktat is unwarranted and a case of blowing a small issue out of proportion, the person added on condition of anonymity.
Also, it's not correct to say off-site meetings are only for rejuvenation as there is a lot of free discussion held in such locations, the person said.
Bankers say they hold only one or two meeting at tourist locations in a fiscal.
"Since we have government nominees on our board, most meetings are held either in Delhi or Mumbai," said the executive director of a south-based public sector bank.
Generally, banks hold around 10 board meetings and more than 15 meetings of different committees including the audit committee.
Last July, the finance ministry had stopped all ministries and departments from holding meetings at five-star hotels, put restrictions on foreign travel and told them not to buy new vehicles or create posts, as part of its fiscal consolidation drive.
Pranab Mukherjee warns public sector banks on falling asset quality
NEW DELHI: Finance Minister Pranab Mukherjee has warned the state-run banks against deterioratingasset quality and called for better professional supervision. "The Reserve Bank of India has recently advised selected banks to take necessary steps for appropriate NPA management," he said at a Bank of India function on Monday.
The gross NPA ratio of public sector banks as of March 2012 stood at 3% of the gross advances as compared to 2.25% a year ago.
Mukherjee said banks have to tread cautiously on the risks confronting the banking sector, especially risks arising out of asset quality, market volatility and global down turn. "One of our major concerns is the deteriorating asset quality in the banking sector as a whole where NPAs have grown at an uncomfortable rate in the past couple of years," he said.
Mukherjee pointed out that net NPAs of the Bank of India have increased from Rs 1,945 crore (0.91%) in March 2011 to Rs 3,656 crore (1.47%) in March 2012.
"Bank of India needs to tighten its belt not only to arrest NPA but also to reverse the trend of asset quality deterioration through better professional supervision," he said.
But financial services secretary, DK Mittal said that the situation is not that grim. "RBI issues advisory from time to time. There are some sectors where there is stress but banks are working hard on the recovery process," he said. Mittal said that the increase in bad loans is because banks have shifted to system generated NPAs. "The increase (once they shifted to a system generated NPAs) in bad loans was to be expected but these all are not bad debts," he said.
The data, however, shows that bad loans have been on a rise, worsened by the economic situation. While only 12% of the loans slipped into NPAs till March 2012, around half of the outstanding restructured loans were added in 2011-12.
The finance minister also stressed on the importance of financial literacy along with financial inclusion. Mukherjee said that the financial illiteracy may lead to economic gains cornered by the financially literate. "Thus along with financial inclusion financial literacy is an important plank in nation building," he said
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