Finance Ministry asks PSU banks to limit loan write-offs--Business Line
NEW DELHI, MARCH 31:
The Finance Ministry has asked public sector banks to limit the amount of loan write—offs and sought details of recoveries made by them in the six years ending 2011-12 with an aim to improve the finances of PSU lenders.
It has also asked the banks to ensure that the amount written off by banks as bad loans does not exceed the cash recovery made during the year.
“In case there is more write off than the recovery made by the bank in a given year, the reasons for the same may also be provided (to the Ministry),” the Finance Ministry said in a recent communication to the heads of all public sector banks.
The Ministry also sought details of “recovery made and prudential write offs category (with number of accounts and amount involved) for the period 2006-07 to 2011-12”.
Concerned over the rising bad loans, Finance Minister P. Chidambaram in a review meeting with PSU bank chiefs earlier this month had asked them to take firm steps against affluent promoters to recover loans from sick companies owned by them.
The warning comes in the backdrop of several companies, including liquor baron Vijay Mallya’s Kingfisher Airlines, unable to repay bank loans on time.
Gross NPAs of PSU banks have risen from Rs 71,080 crore as on March 2011, to Rs 1.55 lakh crore as on December 2012, of which corporate accounts constitute 53.68 per cent.
Of this, about 172 corporate accounts constitute NPAs of more than Rs 100 crore at the end of December 2012. The amount involved in such cases is to the tune of Rs 37,194 crore.
Finance ministry seeks more proactive role from non-official directors of PSU banks--Economic Times
NEW DELHI: The finance ministry has asked non-official directors of public sector banks to take on a more proactive role in governance checks, according to an official, in a move aimed at tightening management control and improving loan recoveries.
According to the official, the ministry wants these directors to be familiar with the key operations of the bank, and has said that the performance of public sector banks should be compared with that of their peers on matrices such as risk management, non-performing assets (NPAs) and customer acquisition and diversification.
"It was observed that the participation of non-official directors was considerably less, and mostly restricted to non-operational issues," the official, who did not want to be named, said, adding that the government wants them to be more proactive and play the devil's advocate if need be.
The ministry has also asked these banks to rope in management institutes, such as the Indian Institute of Managements (IIMs), to impart training to non-official directors to help them discharge their role efficiently.
Banks are also expected to have in place a board-approved loan recovery policy and a nodal officer for recovery at the head or zonal office of the Debt Recovery Tribunal, the official said.
The chairman of a state-run bank said the directives are a part of the finance ministry's initiative to strengthen the general governance in banks.
The move comes close of the heels of the ministry asking state-runs banks to get their top 300 non-performing accounts reviewed by the management committee of the bank board, and pursue an effective and strict recovery policy especially in cases of affluent promoters.
"We want bank boards to scrutinise all defaulters and take strict action against willful defaults," the above quoted official said.
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