High rates, slow economy is hurting repayment capacity of borrowers : Pranab Mukherjee

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Concerned over the country's poor economic growth, the Finance minister Pranab Mukherjee said that the high rates and slow industrial activities have stressed the repayment capacity of borrowers.

"Increase in interest rates and slowing economic growth during 2011 have adversely impinged on the repayment capacity of all categories of borrowers, especially small and medium enterprises," Mukherjee said in a reply to the Rajya Sabha.

There has also been an appreciable rise in the non-performing assets in most of public sector banks. The rise came on the back of the shift to system based recognition of NPAs during the June-September, 2011 quarter, added Mukherjee while highlighting the banks could restructure such accounts if it is done within the Reserve Bank's framework.

"However, in case restructuring is done outside the RBI's framework, the asset classification benefit is not available to the banks," said Mukherjee.

The comment was in line with his earlier statement wherein he mentioned that high interest rates and lower economic growth impacted the repayment capacities of borrowers and pushed up the non-performing assets (NPAs) of banks to Rs 1.27 lakh crore during April-December, 2011.

Banks' bad loans stood at Rs 94,084 crore in 2010-11, Rs 81,813 crore in 2009-10 and Rs 68,220 crore in 2008-09, mentioned the minister.

Story first published: Wednesday, April 25, 2012, 13:31 [IST]
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