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Kelkar asks banks to 'pay attention' to NPAs, stresses efficiency

Finance Secretary Vijay Kelkar on Tuesday called upon banks to bring about a dynamism and depth in the capital market and told the chief executives of the banks to play a lead role in the coming divestment process.

Dr Kelkar made these comments while reviewing the performance of public sector banks in relation to areas such as priority sector advances, progress of implementation of government sponsored schemes and non-performing assets.

Dr Kelkar said internationally there was a lot of focus on India's financial system. He called upon banks to pay attention to the issue of non-performing assets and take timely action to recover NPAs over a period of time.

He said there was appreciation abroad of India's success on Resurgent India Bonds. But at the same time there was concern about the health of the country's financial system.

Dr Kelkar called for adoption of best practices available in the banks to make the banking sector efficient.

The participants expressed concern at the ''over-exaggeration'' of NPAs of public sector banks and said this has been done to create panic in the market.

They said in the last three years they have recovered Rs 250 billion and provision has been made for another Rs 200 billion. They expressed concern over growing NPAs in both priority and non-priority sectors and said the legal process and the procedures in debt recovery tribunals have to be streamlined to ensure better recovery.

As regards priority sector lending, it was found that banks have exceeded the target of 40 per cent in the last two financial years. State Bank of Travancore, with 57.99 per cent of its advances to the priority sector, leads all other banks.

The meeting also reviewed the performance of the banks with regard to government-sponsored credit-linked schemes. The participants underlined the need for better recovery with regard to certain credit-linked schemes like the Integrated Rural Development Programme.

Special secretary (banking) C M Vasudev, who addressed the meeting, conveyed the finance minister Yashwant Sinha's concern for enhanced loans to rural housing schemes.

He said the feedback from the National Housing Bank was that the contribution of public sector banks was largely in the form of wholesale type of lending. He called upon the banking sector to implement the suggestions which have come out of the Kapoor Committee report on small-scale sector and the R B Gupta Committee report on agriculture. He urged the bankers to keep themselves in readiness for the Y2K problem.

UNI