Tough Actions To Be Initiated Against Willful Defaulters

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Tough Actions To Be Initiated Against Willful Defaulters www.ambitionias.com
  • Finance Minister P Chidambaram’s directions in the meeting between him and heads of state-owned banks:
    • Increase efforts for recovery of loans and adopting tough measures against willful defaulters.
    • ‘Promoter is prosperous but the company is sick’ stand taken by defaulters is not acceptable and directed the banks to form a consortium to take joint action against such defaulters.
    • Upon non-payment, tough action including change of management to a person who may be capable of providing assets should be considered.
    • Focus on the top 30 defaulters.
  • Discussions were also held on the relevant measures to bring down NPAs and the various options for funding including ESOPs, SPV model and holding company model.
  • Top 30 non-performing assets (NPAs) of state-owned banks accounted for 40.2 per cent of their gross NPAs.
  • Sluggish domestic growth and dull recovery in the global economy have impacted the NPAs elevating the gross NPAs of PSBs to 4.44% from 3.84% last year. The latter has also decreased net profit.
  • In Housing sector, including priority housing:
    • 18.4% growth was registered during 2013-14 with a total lending of Rs.5,408 lakh crore.
    • NPAs decreased from 18% in 12-13 to 1.47% in 2013-14.
    • The target of 15% lending to minorities was met.
  • Finance Ministry has directed banks to consider setting up holding company and special purpose vehicle (SPV) to raise funds for expansion since govt might not provide more than Rs. 8000 crore additional capital.
  • Read at: http://www.thehindu.com/todays-paper/tp-business/be-tough-on-wilful-defaulters-banks-told/article6006813.ece

Exams Perspective:

  1. What are Non Performing Assets?
  2. What is a Special Purpose Vehicle (SPV)?
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