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IBA chief rules out relaxation of NPA norms

Indian Banks Association Chairman A T Pannir Selvam ruled out any relaxation in the non-performing asset norms in India, ''which are far more liberal than in most foreign countries.''

''The IBA would not permit extension of repayment period from two quarters to four quarters for servicing interest and debt instalments,'' he said while addressing a meeting organised by the Indian Merchants' Chamber in Bombay today.

Responding to suggestions that the loan repayment schedule must be temporarily relaxed in view of widespread recessionary conditions, Selvam said bank prudential norms are non-negotiable.

''In fact, in advanced countries, the repayment schedule has been reduced from two quarters to one quarter. India will become a laughing stock, if it is to goes against the trend,'' he pointed out.

He said the NPAs of Indian commercial banks are not alarming, as is being made out. Of the total NPA worth Rs 450 billion, accumulated over the past 20 years in banks in India, the priority sector accounts for about 50 per cent and industry for the remaining 50 per cent.

Also, of the total of Rs 450 billion, NPA worth Rs 200 billion is provided for with collaborals and guarantees, which are realisable. Therefore, the NPA accrued with banks is no more than Rs 250 billion.

According to a study made by techno-economic consultant Girish Vasudev, the NPAs are likely to increase in future because of the credit card business if not properly administered with technology and back office support.

Vasudev told a meeting in Bombay that the need-based back office support was key to the success of any credit card operations.

In card business, he said, the profitability was not a function of volume as the higher volume of turnover could lead to higher risk and lower profitability. In fact, it is the control on costs and constant vigil on negative features that would sustain the viability of the card business.

In Asia Pacific region, the volume of credit card business is on the rise with a growth rate of over 20 per cent, but the technological inputs remained way behind and legislation is woefully inadequate.

In India, there are about 3.1 million card-holders spending around Rs 65 billion which is less than one per cent of individual spending as compared to 8.8 per cent globally.

UNI