Govt plans high-level panel to tackle bad loans as bank NPAs cross 6%

The government is reported to be planning to set up a high-level panel to effectively deal with the issue of rising bad loans or non-performing assets, with state-run banks, which now have gone up to alarming levels amidst a slowdown in economic activity.

The issue was discussed at the meeting of finance minister with the heads of PSU banks, but the specifics are yet to be worked out, financial services secretary Anjuly Chib Duggal said, adding that the government will certainly have a more focused look on certain sectors.

Reports, meanwhile, said a panel on non-performing assets (NPAs), which is likely to be headed by minister of state for finance Jayant Sinha, is in the offing.

Gross NPAs of state-run banks rose to 6.03 per cent of their total loans as at the end of June 2015, as against 5.20 per cent in March 2015.

"NPA is a matter of concern and the government is vigilant in this regard. The government is looking into the problems faced by steel, aluminium and textile sectors," she said.

These are the sectors which have a high share of total NPAs of public sector banks.

"NPAs are a result of many factors. There is not one silver bullet that is going to deal with them... It will require us to take a multi-dimensional approach," Sinha said earlier in the day.

On Indian Overseas Bank issue, Duggal said, "There is a mechanism already to check fraud. Fraud is clearly an issue. It's is an area of concern."

On financial inclusion, she said differentiated banking is very much on the cards.

"Geographical differentiation is going to happen. With smaller banks serving smaller areas, trust gets better and outreach is better and personal," she said.

She stressed on the need for lowering of the cost of delivery to push financial inclusion.

"We are looking at moving a little further towards lowering costs in delivery of products," the secretary added.

On the Pradhan Mantri Jan Dhan Yojana, Duggal said it has got a very good response and deposits under the scheme have crossed Rs27,000 crore. Also, zero balance accounts have come down to about 35 per cent, she added.