FM spreads Diwali cheer, says gloom overdone

Written by fe Bureau | New Delhi | Updated: Oct 23 2013, 17:32pm hrs
Finance minister P Chidambaram on Tuesday observed that the investment climate in the country wasnt as dull as was being made out to be, pointing out that between April and September, 173 projects entailing an expenditure of R3.24 lakh crore had been submitted to banks. Even in this current environment, we have got so many proposals and these are being processed, Chidambaram told reporters after a three-hour-long meeting with chiefs of public sector banks (PSBs) at which he reviewed their quarterly performance.

The finance minister announced that the Reserve Bank of Indias (RBI) twin schemes to attract foreign funds, through Foreign Currency Non-Resident (Banking) accounts and for the purpose of tier I capital, had attracted $9.6 billion. The government has been keen to attract foreign exchange flows to shore up the balance of payments and keep the rupee stable. RBI governor Raghuram Rajan had announced a special swap window facility to help banks attract NRI deposits banks are allowed to swap new FCNR(B) deposits with a minimum tenure of three years at a fixed cost of 3.5%.The schemes are open till November 30.

The finance minister also told newspersons that public sector banks will soon receive capital from the government. An amount of R14,000 crore will be allocated to different banks today. We will sit with the Reserve Bank of India and Sebi for formal procedures, he said.

The additional capital will help maintain lenders achieve a minimum tier I capital of 8% under Basel III norms and grow their loan books. Of the 26 public sector banks, Indian Bank is the only lender that has told the government it does not require any capital infusion this year. In 2012-13 the government had infused Rs 12,517 crore into the banking system and State Bank of India had got the largest chunk of Rs 3,004 crore.

Among the big-ticket projects for which funds have been fully tied up are Tata Steel Odisha (Rs 43,149 crore), Krishnapatnam Port (Rs 4,,931 crore), and ONGC Petroadditions (Rs 21,396 crore) and Orient Cement with an investment of Rs 1,718 crore. Prior to March 31, 176 new proposals were presented to banks, of over Rs 250 crore each, totalling 4.65 lakh crore, of which 137 projects have either been cleared or are in the advanced stages of clearance.

This means things are not as gloomy as it is painted sometimes. There are new proposals and they are being cleared. They may still face some obstacles here and there and one or two loose ends may have to be tied up. Things are moving thanks to the Cabinet Committee on Investments and the Project Monitoring Group. Investors are encouraged to submit new proposals to banks for loans, the minister said.

Chidambaram expressed concern over the growing non-performing assets (NPAs) and defaults by big borrowers with loans over Rs 1 crore and said the government was monitoring the top 30 NPA accounts in each PSB zone-wise. The minister said he has asked the lenders to constitute a separate vertical headed by an officer of the rank of general manager to look at recovering money from written-off accounts. He said, however, that NPAs are only a function of the slowdown in the economy, adding that once growth picks up the situation would improve. As of June, the gross NPA of PSBs was 3.89%, while that of the State Bank group was 5.5%.

The other encouraging sign was the growth in housing loans. In the second quarter, housing loans grew by 61% year-on-year, compared with a 42% growth in the first half.

Separately, referring to a proposal that the government should permit import of coins for shagun (auspicious gift) purposes, the minister ruled out removing the ban on import of gold coins and medallions in the near future and asked banks to strictly comply with these norms.