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Sunday, June 1, 2014

Bad loans a cause of concern: RBI Deputy Governor R Gandhi

Reserve Bank Deputy Governor R Gandhi expressed concern over bad loans and said banks should strengthen their internal credit appraisal systems to minimise the risk of default.

"The final (NPA) figure for March 2014 is yet to be known; while some may view this ratio as reasonable, given the economic conditions prevalent in the country and elsewhere, the total stressed assets in the banking system (including restructured standard assets) as at December 2013 was 10.13 per cent of the gross advances of the banks, which is a cause of concern for the Reserve Bank," he said.

However, he said early indications are that the figures for the fourth quarter are better than the third quarter.

The gross non-performing assets (NPAs) or bad loans of the domestic banking system was 4.4 per cent of gross advances, he said at an event organised by Assocham here.

To minimise the risk of default, he said, "There is a growing need for banks to strengthen their internal credit appraisal system that is on their credit assessment and risk management mechanisms."

At the same time, he said, banks should consider using external credit appraisals in conjunction with their own assessment.

"This would mean getting the house in order and at least on this score, banks would be on stronger ground. Banks would still be vulnerable to other factors, such as economic slowdown or policy changes or wilful defaults. But, one area of concern would be plugged," he said.

"We can see that among the proactive steps that a bank can take to stem the problem of increasing level of NPAs and stressed assets, use of credit ratings is an important one," he added.

However, he said, banks need to balance the use of external ratings, as the recent financial crisis has highlighted the dangers of overdependence on ratings.

Noting that growing NPAs are the biggest challenge for the banking industry, he said a slowing economy is bound to see an increase in bad loans.

"Notwithstanding the economic weakness, NPAs of banks have registered increase since 2011-12, which is a cause of concern for us," he said, adding that the rise is more pronounced in the case of public sector banks.

The gross NPAs of public sector banks rose to Rs 2.03 lakh crore at the end of September from Rs 1.55 lakh crore on 31 March, 2013.

Source: Economic Times
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Canara Bank aims to reach aggregate biz of Rs 8.50 lakh crore

Public sector lender Canara Bank is targetting to reach an aggregate business of Rs 8.50 lakh crore during this fiscal with plans to add 1,250 branches, a top official today said.

"The bank was aiming to reach an aggregate business figure of Rs 8.50 lakh crore with a deposit growth of 16-17 per cent and advances growth of 19-20 per cent by March 2015," bank's Chairman and Managing Director R K Dubey told reporters here.

During 2013-14 fiscal, the bank's business had touched Rs 7.22 lakh crore. Last year the GDP growth had dipped, there was slow down in economy and raising capital was a problem.

But the bank registered a 20.7 per cent growth, opened 1,027 branches of which 80 per cent was in rural and semi urban areas, he said.

The public sector lender will be adding 1250 branches this year, including 100 in Kerala, to increase its branch strength from 4,755 to 6,000 and ATMs from 6,312 to 10,000 by March next year, he said.

The bank was planning to raise capital of Rs 3,000 crore this fiscal to meet its capital requirement. "We may raise capital from government or from market or from bonds. As market improves, we will go for the best option subject to government and RBI approval," he said.

The bank has five overseas branches -- London, Leicester, Hong Kong, Manama and Shanghai and had plans to open 20 more branches abroad. Total business of the foreign branches reached Rs 43,0450 crore during the previous fiscal, he said.

It would be opening a branch at Johannesburg in South Africa and has plans to open branches at New York by June this year and 8 other international centres, including Dubai, Qatar, Frankfurt, Sao Paulo, Dar-es-Salaam and Tokyo, by march next.

On recruitments, he said 9,000 persons were recruited in various categories last year and 8,000 would be taken this year. The total staff strength of the bank was 50,000.

Asked about media reports that government wanted commercial banks to offer interest free loans of up to Rs 50,000 to victims of loan sharks, Dubey said "under no scheme loans can be given at zero rate of interest. Loans cannot be given as doles. Interest can be subsidised by the government", he said.

Source: Economic Times
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