Parliamentary panel wants mechanism to detect NPAs early

Wilful defaulters should be dealt with sternly and the due amount should be recovered within specific time, the panel has said.

New Delhi, April 4: Concerned over the high level of bad loans in the banking system, a parliamentary panel has asked PSU banks to devise a mechanism to detect stressed assets early so that urgent corrective steps can be taken.

"The committee intends to caution the management of public sector banks to professionally manage the sanctioning of loans and devise all the requisite wherewithals to notice early signs of stress on the loans disbursed by them for taking urgent corrective measures," a report of the Parliamentary panel said.

Gross NPAs of public sector banks increased to Rs 6,06,911 crore while total stressed assets (gross non-performing assets and restructured standard advances) of scheduled commercial banks stood at Rs 9.64 lakh crore as on December 31, 2016. As of September-end, the banks' total stressed loans were Rs 8,97,000 crore.

"The committee is also of the firm view that there is an urgent need for PSBs to reduce their stressed assets and clean up their balance sheets -- which would increase their ability as also their credibility to raise capital in the future," the report submitted to Parliament recently said.

The panel also asked the finance ministry to amend banking laws, including SBI Act, to provide for disclosure of names of loan defaulters by banks to tackle the menace of mounting NPAs. Section 44 of the State Bank of India Act, 1955 as well as some other clauses of confidentiality in the relevant laws invariably prohibit disclosing the names of individuals who owe money to banks or are responsible for bad loans on account of their failure to repay.

According to the report of the committee, the names of defaulters are, however, shared with the Reserve Bank of India and the Credit Information Bureau Limited. The report also takes note of the averments made by the finance ministry (department of financial services) that there is no proposal to amend the relevant provisions of law to disclose the names of defaulters and publish the same in public domain.

The committee on Petitions said that in view of serious magnitude of the problem of bad loans, wilful defaulters should be dealt with sternly and the amount due from them should be recovered within a specified time frame. The committee asked the finance ministry to apprise it of the final outcome within three months of presentation of its report.

"With a view to containing the burgeoning NPAs in banks, the Committee, therefore, strongly recommends that the government should make appropriate amendments in the archaic provisions of the SBI Act and other relevant laws to disclose the names of individuals who owe money to the banks or are responsible for bad loans on account of their default to repay," it said.

PTI