Urgent Initiatives in Infrastructure, Iron and Steel, Textiles, Aviation, and Mining

The RBI in its Financial Stability Report, December, 2013 has indentified five sectors – infrastructure, iron and steel, textiles, aviation, and mining – as the stressed sectors.  PSBs have high exposures to the “industry” sector in general and to such “stressed” sectors in particular.  The survey mentions that the increase in NPAs of banks is mainly accounted for by switchover to system-based identification of NPAs by PSBs, slowdown of economic growth, and aggressive lending by banks in the past, especially during good times. Asset quality in the banking system has deteriorated in the post-crisis years and among banks groups, PSBs had the highest level of stress in terms of NPAs and restructured advances.  Some recent initiatives taken by the government to address the rising NPAs include:

• Appointment of nodal officers in banks for recovery at their head offices/zonal offices/for each Debts Recovery Tribunal (DRT).
• Thrust on recovery of loss assets by banks and designating asset reconstruction companies (ARC) resolution agents of banks.
• Directing the state-level bankers’ committees to be proactive in resolving issues with the state governments.
• Sanction of fresh loans on the basis of information sharing amongst banks.
• Conducting sector/activity-wise analysis of NPAs.
• Close watch on NPAs by picking up early warning signals and ensuring timely corrective steps by banks including early detection of sign of distress, amendments in recovery laws  and strengthening of credit appraisal and post credit monitoring.