Centre seeks report on PSB action against loans that may turn NPAs

The government has asked the public sector banks (PSBs) to submit a report on the action taken against the loan accounts of Rs 50 crore and above that may turn into a non-performing asset (NPA).

"We have asked the banks to submit a report apprising the government of the action taken by them on the loan accounts of Rs 50 crore or more. The banks have to give their report within this month," a senior official in the Department of Financial Services (DFS) told DNA Money.

As part of the banking reforms, PSBs were asked to examine the loans of Rs 50 crore and above for fraud and wilful default in the aftermath of the Rs 13,500 crore fraud at the Punjab National Bank. The banks were directed to identify potential NPA accounts and refer them to the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED) for further investigation.

NPAs in the state-run banks touched Rs 7.3 lakh crore in June, 2017, as per Reserve Bank of India (RBI) data. Corporate loans accounted for the maximum of these bad loans.

Apart from the action on bad loans, the finance ministry has also asked the PSU banks for an update on the compliance of the Enhanced Access and Service Excellence (EASE) reform agenda. The report has to be submitted this month, sources said, referring to a separate communication of the DFS to the banks.

In January, the government had announced an EASE plan as part of its banking reform agenda. It included implementation of six important steps such as improving customer experience, responsible banking, credit off-take and deepening financial inclusion. The banks have also been directed to set up stressed asset management vertical, tie up with agencies for a follow up on loans above Rs 250 crore and monetise non-core assets. In the case of large loans, they have been asked to follow efficient practices such as keeping a minimum threshold of 10% for participating in consortium loans. The various targets under the EASE plan have to be completed in a span ranging from a couple of months to four years.

To follow up on the reform measures undertaken by the banks, the finance ministry will hold a meeting on May 17 with the public sector banks which have been put under the prompt corrective action (PCA) framework of RBI.

"A meeting has been called to review their EASE plan and various commitments under it. We will discuss their plans to come out of the PCA so that they don't slip further," DFS secretary Rajiv Kumar said.

As many as 11 state-owned banks have been asked to attend the meeting. Dena Bank, Central Bank of India, Bank of Maharashtra, IDBI Bank, UCO Bank, Oriental Bank of Commerce, Indian Overseas Bank, Corporation Bank, Bank of India, Allahabad Bank and United Bank of India are under the PCA on account of poor performance. The ministry is implementing a reform agenda to bring them out of the NPA mess, improve their financial health and make them more accountable by fixing the responsibility of managers as well as auditors.

PROMPT ACTION

• The banks were directed to identify potential NPA accounts and refer them to the CBI, ED
   
• NPAs in the state-run banks touched Rs 7.3 lakh crore in June, 2017, according to Reserve Bank of India data