The amount of bad loans written off or restructured by the PSU banks has more than doubled in the last three years ending March 2014 to Rs 42,447 crore.
The rise in bad loans is being attributed to slowdown in the economy which slipped to below 5 per cent in the two consecutive financial years — 2012-13 and 2013-14.
The loans written off/compromised by PSU banks soared from Rs 20,752 crore in 2011-12 to Rs 32,992 crore in 2012-13 and further to Rs 42,447 crore in 2013-14, as per RBI data.
Reserve Bank Governor Raghuram Rajan has been highlighting the problem of rising bad loans in the banking sector.
He had earlier said that the “total write offs of loans made by the commercial banks in the last 5 years is over Rs 1.61 lakh crore, which is 1.27 per cent of GDP… To put this amount in perspective — (it) would have allowed 1.5 million of poorest children to get a full university degree from the top private universities in the country, all expenses paid”.
In order to deal with the problem of bad loans, RBI has recently issued a comprehensive framework for revitalising distressed assets in the economy.
The framework outlines the corrective action plan that will incentivise early identification of problem cases, timely restructuring of accounts which are considered to be viable and taking prompt steps by banks for recovery or sale of unviable accounts.
Public sector banks accounted for over 90 per cent of total non-performing assets (NPAs) that the banking sector registered in 2013-14.
Of Rs 2.40 lakh crore gross NPAs reported by Indian banking system in 2013-14, Rs 2.16 lakh crore was accounted for by the public sector banks.
Private sector banks had gross NPAs of Rs 22,738 crore as of March 31, 2014.