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"Big industries are top defaulters"

Friday 29 April 2005

Special Correspondent

NEW DELHI: Union Finance Minister P. Chidambaram on Thursday said various measures adopted for recovery of loans given by public sector banks were eclipsed by the fact that "the big industrial companies/borrowers have been the top defaulters." Still, their gross non-performing assets (NPAs) came down from 13.98 per cent in 2000 to 7.8 per cent in the last fiscal.

The Minister was responding to a calling attention notice in the Lok Sabha by Gurudas Dasgupta of the Communist Party of India on the "situation arising out of huge NPAs in banks due to default in payment of loans mainly by big borrowers."

Mr. Chidambaram contradicted the member’s claim that the NPAs were increasing. The gross NPAs, which were Rs. 56,473 crores on March 2002, came down to Rs. 51,538 crores on March 2004.

"There has been a similar decline in net NPAs also,’’ which came down from Rs. 27,958 crores to Rs. 18,860 crores for the same period.

Accordingly, the percentage of net NPAs to net advances came down from 5.82 in 2002 to 3 in 2004.

Conceding in part the CPI member’s contention that big business houses were among the bigger defaulters, the Minister said it was not possible to recover every rupee lent. In a competitive economy, some loans would turn sour and debt restructuring ought to be there. Citing the case of the steel companies which went into losses a couple of years ago - naming Tata, Essar and Steel Authority of India - he said had the banks insisted that they repay as agreed upon, the firms and their employees would have been affected. "Now that they are making profits, they are paying back.’’

Providing data on the repayment pattern of different categories of borrowers, the Minister said there was no "one-size-fits-all answer" to the issue of NPAs. Responding to members’ demand that the names of big defaulters be published, he said there was a provision in the Reserve Bank of India Act that mandated confidentiality.

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