Call for management change if company defaults wilfully: Rajiv Takru tells banks

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Call for management change if company defaults wilfully
The Financial services secretary Rajiv Takru on Tuesday asked banks to bring the management change in the companies which are wilfully defaulting on the loan repayment, leading to deteriorating health of the public sector banks.

A Business Standard report quoted Takru as saying that "Unfortunately, I get a feeling there are some who see distressed conditions as an opportunity to get rid of loan repayment. People taking loans must understand they have to repay the money. When they (companies) are in distress due to bad management, the expectation that banks would pick up the tab is uncalled for."

The statement of Takru came at a time when Indian banks are struggling to recover amid slowing economic growth and eteriorating loan portfolio. The rating agency S&P expects the banking sector's non-performing assets (NPA) ratio to surge to 3.9 per cent of total loans in 2003-14 and to 4.4 per cent in 2014-15, compared with 3.4 per cent in fiscal 2012-13.

In the ongoing quarterly earnings season, most of the public sector banks have reported a steep rise in the NPAs and provisioning against the bad loans. India's largest bank State Bank of India (SBI) said its Gross NPAs have gone up by Rs 9,702 crore, or 19 per cent sequentially. Also a report showed that gross NPAs of 22 public sector banks grew 51 per cent from a year ago to Rs 1.2 trillion in the June quarter, signalling that the health could not have deteriorated sharply than this.

Dion Global Solutions Ltd.

Story first published: Wednesday, August 14, 2013, 9:10 [IST]
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