Canara bank chief RK Dubey said his bank’s non- performing assets (NPA) has potentially shot up by over Rs 400 crore in June this year after the Telangana government announced an agricultural loan waiver.
Speaking at a seminar on NPAs, Dubey said loan recovery has been impacted not only in Telangana but also in several other poll bound states including Jharkhand, Maharashtra and Haryana.
He said the impact of such announcements make their impact felt in the banking sector for years and needed to be avoided. He said this has happened despite the robust loan recovery process in Canara Bank, which he termed was one of the most aggressive in the public sector banking space. Experts from the banking sector mulled over the rise in bad loans at the seminar organised by the recently formed Association of Business Chambers of Commerce and Industry on Saturday.
According to former NIPFP professor Indira Rajaraman, the spike in NPA in the banking sector was a result of several factors among which was that of directed banking. She suggested that the decision making in the state-owned banks have to build in a mix of ownership and a rise in the ablity of the bankers to assess the changing nature of risks in various sectors.
While the NPAs of Indian banks have reached Rs 2.4 lakh crore by the end of calendar year 2013, the sum along with that of stressed assets have reached more than 10 per cent of the total turnover of the sector. Both Crisil and Icra have raised warning bells that this could touch 15 per cent by 2016.