PSU Banks Credit Growth to take off

PSU Banks Credit Growth to take off

World Bank

Credit Delivery is likely to be brought into the system by PSU banks due to Recoveries and Capital Infusion.

  • Banks have successfully recovered about Rs. 3 lac crore of their sticky assets from promoters who have defaulted in the recent years.
  • The phone banking culture has been brought to an end by the Government and the system as claimed by the Government has been cleaned.
  • Thanks to the Recoveries and infusion of Fresh Capital to the tune of Rs. 2.6 lac crore has brought a stage for a possibility in the Credit Delivery by PSU Banks which is a good signal.
  • Some banks have also been brought out of the PCA (Prompt Corrective Action) framework, with the above mentioned Rs. 3 lac crore recoveries.
  • As on January 4, 2019 Annual bank loan has grown by 14.5% as per RBI data, which is attributed mainly to the growth in Retail Loans.
  • Earlier banks used to chase only small business men for repayment of loans, while the big businessmen had become a big headache for the banks.
  • But now, defaulting management are either paying their loans or quitting their business which is a good signal.
  • A Government notification adds that approach towards resolution and approach for bad loan recognition has also been streamlined.
  • During 2018 the Gross NPA of PSU Banks arising out of big loans of more than Rs. 5 crore rose by 23.1% from 18.1% in the previous year.
  • Either low capacity utilization or difficulty in completion projects, made many of the borrowers position precarious who could not pay back the dues.
  • An asset quality review and also inspection carried out in 2015 also revealed that many projects were concealed either due to restructuring or other reasons.

Note: The increased NPAs and continued losses had stalled credit growth in banks till the September quarter last year.

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