With economy in slow gear and rising non-performing assets, the Indian banks, particularly those in the public sector, went through very challenging times in 2014 but the new government seems determined to repair the losses and restore confidence of bankers in the coming year. The biggest problem for the public sector banks in 2014 related to non-performing assets (NPAs) triggering debates whether the bad loans are a result of only the economic slowdown or some of the large wilful defaulters who had the capacity to repay loans but would not pay taking refuge in the legalese.
One such case which dominated the media related to Vijay Mallya-owned Kingfisher Airlines that owed Rs 7,500 crore to the banks with the maximum exposure of Rs 1600 crore from the State Bank of India. But it was the United Bank of India which showed the courage to declare Mallya and his group company United Breweries (Holdings) as wilful defaulter.
In fact, India Inc has not been really used to the terminology of the 'wilful defaulter' and the issue has been taken head on not only by the United Bank but also by Reserve Bank of India Governor Raghuram Rajan described such non-cooperative as free-loaders.
"We need a change in mindset, where the wilful or non-cooperative defaulter is not lionised as a captain of industry, but justly chastised as a freeloader on the hardworking people of this country," Dr Rajan had given this famous quote. Different estimates place the NPAs of the public sector banks upward of Rs 2,40,000 crore and Gross NPAs as six per cent of the total lending by the banks.
The problem is so serious that the Finance Ministry is concerned about it and would be discussed at a retreat of bankers with Prime Minister Narendra Modi in Pune on January 2-3. Another issue which confronted the banks in 2014 related to inadequate capital at their command to meet the Basel-II norms as also for meeting their credit expansion requirements. Given the enormous amount required for capitalising the banks, the Cabinet has given a go-ahead for them to raise capital from the stock market but the government must retain its stake up to 52 per cent.
While the stock market had a good run since August, 2013 the investors have generally been wary of the PSU banks concerned over the high level of NPAs. Whether the banks will get an opportunity to raise capital from the market at a right price remains to be seen.
The RBI on its part took initiatives which include giving new licences to Bandhan, a cooperative outfit of West Bengal and IDFC. It has also issued guidelines for payment banks so that technology can be used to gain financial inclusion. Super stores and mobile telephones would be the payment channels in times to come. The banks also had a major challenge to meet the targets set under the Prime Minister's Jan Dhan Yojna for achieving financial inclusion of those who have been kept out of the banking channels. Upto November 28, eight crore accounts have already opened for those who would have entered a bank branch for the first time in their lives.
The objective is two fold: to bring the have-nots in the banking channels and to better target the government subsidies so that leakages can be plugged.
One such case which dominated the media related to Vijay Mallya-owned Kingfisher Airlines that owed Rs 7,500 crore to the banks with the maximum exposure of Rs 1600 crore from the State Bank of India. But it was the United Bank of India which showed the courage to declare Mallya and his group company United Breweries (Holdings) as wilful defaulter.
In fact, India Inc has not been really used to the terminology of the 'wilful defaulter' and the issue has been taken head on not only by the United Bank but also by Reserve Bank of India Governor Raghuram Rajan described such non-cooperative as free-loaders.
"We need a change in mindset, where the wilful or non-cooperative defaulter is not lionised as a captain of industry, but justly chastised as a freeloader on the hardworking people of this country," Dr Rajan had given this famous quote. Different estimates place the NPAs of the public sector banks upward of Rs 2,40,000 crore and Gross NPAs as six per cent of the total lending by the banks.
The problem is so serious that the Finance Ministry is concerned about it and would be discussed at a retreat of bankers with Prime Minister Narendra Modi in Pune on January 2-3. Another issue which confronted the banks in 2014 related to inadequate capital at their command to meet the Basel-II norms as also for meeting their credit expansion requirements. Given the enormous amount required for capitalising the banks, the Cabinet has given a go-ahead for them to raise capital from the stock market but the government must retain its stake up to 52 per cent.
While the stock market had a good run since August, 2013 the investors have generally been wary of the PSU banks concerned over the high level of NPAs. Whether the banks will get an opportunity to raise capital from the market at a right price remains to be seen.
The RBI on its part took initiatives which include giving new licences to Bandhan, a cooperative outfit of West Bengal and IDFC. It has also issued guidelines for payment banks so that technology can be used to gain financial inclusion. Super stores and mobile telephones would be the payment channels in times to come. The banks also had a major challenge to meet the targets set under the Prime Minister's Jan Dhan Yojna for achieving financial inclusion of those who have been kept out of the banking channels. Upto November 28, eight crore accounts have already opened for those who would have entered a bank branch for the first time in their lives.
The objective is two fold: to bring the have-nots in the banking channels and to better target the government subsidies so that leakages can be plugged.
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