Bad debt of public sector banks hit 9-year high

In what could be called a major challenge before the new government, bad debts of public sector banks (PSBs) have surged to a nine-year high, with the corporate sector accounting for most of the rise.  NPAs, or bad loans, of state run banks have seen a surge since the global financial meltdown in 2008. According to provisional data compiled for 19 public sector banks by the Finance Ministry for the meeting, Gross NPAs as a ratio of gross advances have reached 4.44 per cent against 3.84 per cent in 2012-13, though less than 5.07%  as on December 2013, the gross NPAs are still at their highest level since 2004-05 when they touched 5.5%. PSU banks have recovered Rs 18,933 crore of bad loans during the nine months through December 2013. Meanwhile, amidst the pile of rising bad loans, Finance Minister P Chidambaram will review financial performance of public sector banks (PSBs) and would review overall credit growth, with particular reference to agricultural credit, MSME credit, housing loan, education loan and lending to minority communities among others. Additionally, he would also evaluate the performances of these banks with regard to the steps taken by them to reduce their NPAs. Besides, Chidambaram would also discuss the issue of capital adequacy for the banks, and deliberate upon the progress made with regard to the stalled projects especially in those cases, where PSBs have extended credit facilities. Sluggish domestic growth along slow world economic recovery and continued uncertainty were cited as some of the reasons behind the heap of bad loans.