Govt optimistic on loan recovery by banks

Some finance ministry officials expressed confidence that the public sector banks (PSBs) would achieve remarkable improvement in reducing bad loans.

Bad loans of state-run banks have been rising because of the slowdown in the economy and weak financial position of borrowers.

Official data indicates that bad loans with respect to the priority sector, which include agriculture and medium and small enterprises, rose during the quarter ended December 31 vis-à-vis the previous quarter.

Recently, the finance ministry urged all state-run banks to reduce their non performing assets (NPAs) or bad loans to 1 per cent of their total advances by March 31, 2014.

It is learnt that the country’s largest state-run bank State Bank of India managed to reduce its NPA by over 1 per cent in March alone.

That still leaves SBI with a fair bit to do to achieve its new NPA target. As of end-December 2012, SBIÂ’s bad loans were at over 6 per cent (gross NPAs) of its advances.

Reports indicate that the bad loan position in relation to retail and real estate loans improved recently.