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Finance Ministry asks public sector banks to limit loan write-offs

Press Trust of India
Mar 31, 2013 at 12:10pm IST

New Delhi: 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.

Finance Ministry asks PSU banks to limit loan write-offs

The Finance Ministry 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.

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.

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