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Finance ministry tells PSBs to review top non-performing accounts
March, 21st 2013

The finance ministry has directed state-runs banks to get their top 300 non-performing accounts reviewed by their board's management committee and pursue a strict recovery policy, especially in cases where defaulting companies have affluent promoters, according to an official.

"The board will look into these cases and suggest measures accordingly. Where there is a case for recovery, all steps will be taken," the finance ministry official said.

Almost all state-run banks have senior finance ministry officials on their boards. Gross non-performing assets of public sector banks increased from Rs71,080 crore at the end of March 2011 to Rs1.55 lakh crore at the end of December 2012.

On Monday, Finance Minister P Chidambaram had warned corporate bigwigs against wilful defaults, reminding promoters that it was their duty to bring in additional capital if their companies got into trouble. "We cannot have an affluent promoter and a sick company," he had said.

Banks have also been directed to constitute a board-level committee for monitoring loan recoveries. The ministry has also sought review of non-performing assets (NPAs) worth Rs 1 crore and above by the board of directors. "We have also told banks to lodge formal complaints with the ICAI ( Institute of Chartered Accountants of India) if the auditors of the borrower have been negligent or deficient in their auditing," the official added.

The finance ministry has also pulled up the heads of Bank of Baroda, Central Bank of India, Punjab and Sind Bank, and United Bank of India, the PSU lenders where non-performing loans have risen steadily since December 2011.

"These banks have been told to check fresh slippages and devise a strategy for their minimization, which could include Lok Adalats and recovery camps," the official said. The finance ministry has already directed banks to disclose their top 50 NPAs along with the details of loan sanctioning officer, terms of the loan, the collateral furnished by the borrower, and how the bank covers the risk.

Financial services secretary Rajiv Takru had earlier said that both the government and banks are trying to make a distinction between wilful defaulters and people who have genuine problems.

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