Weak state govt support hits NPA recoveries

Last Updated: Thu, Nov 22, 2012 19:41 hrs

With bottom lines and balance sheets under strain due to rising bad loans, banks have stepped up their efforts for recoveries. However, while going after defaulters and taking possession of assets, banks feel constrained by the inadequate support from state governments.

According to public sector banks, deficiency in support from states and lack of adequate staff and infrastructure with district administrations come in the way of proceeding with recoveries from loan defaulters.

Senior public sector bank official said that this matter was on the agenda of the meeting between Finance Minister P Chidambaram and chief ministers of south zone states held in Bangalore on November 20.

The officials noted that economic slowdown, delayed monsoon, and rising interest rates have pushed the portfolio of non-performing loans of banks. Gross NPAs as a proportion of gross advances have grown to 4.01 per cent in September 2012 from 2.32 per cent at end-March 2011.

According to the officials, higher provisions for NPAs and restructured assets has made a dent in the bottom line of banks. This has prompted banks to step up efforts for recoveries.

Banks often need assistance of the respective states and district administrations to take possession of properties as part of the recovery process. While Andhra Pradesh, Karnataka, Kerala and Lakshwadeep have their Acts for recovery of loans, Puducherry and Tamil Nadu do not have any such Act for recoveries. There is a lack of desirable level of co-operation from district administrations. Also, administrations are not backed by infrastructure and manpower for such task, said officials.

Bankers pointed out that they have been facing these challenges all along, but never voiced their concern as they require assistance from state governments in the form of police protection while moving cash etc. These concerns have been articulated now since the burden of slippages and its risks to balance sheets is palpable.

Bankers salsa suggested a coordination mechanism for improving response. There should be a separate machinery at the district level exclusively for the recovery of dues, they said.

District administrations should also get infrastructure such as regular office, regular staff. Also, fast-track courts will help in quick disposal of cases, bankers suggested.

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