Banks not to witness shocks on account of bad loans: Kochhar
Dismissing concerns of rising bad loans, ICICI Bank Managing Director and CEO Chanda Kochhar on Tuesday said that banking sector unlikely to witness any substantial shocks on account of NPAs and the focus in the current fiscal will be on restructuring of loans of mid-size companies.
New Delhi: Dismissing concerns of rising bad loans, ICICI Bank Managing Director and CEO Chanda Kochhar on Tuesday said that banking sector unlikely to witness any substantial shocks on account of NPAs and the focus in the current fiscal will be on restructuring of loans of mid-size companies.
"...Quality of assets for banking sector is quite stable. We are not going to have substantial shocks on accounts of Non-Performing Assets (NPAs)", she said after attending a meeting on the problems being faced by infrastructure projects, in the Planning Commission.
Kochhar further said that restructuring of loans of major companies, undertaken last year, has worked well and the focus now would be on mid-size companies.
"When we look at restructured assets, experience shows that for the industry as a whole, just about 15 percent of the restructured assets have turned into NPAs. The most of restructured assets actually worked out", she added.
In general, Kochhar added, "we should remember that in growth economy like India, most of restructured assets work will work. They will turn out into performing assist."
Banks restructure the loans of companies which have not been able to operationalise projects because of external factors like deteriorating economic conditions, poor demand, unavailability of raw material and delay in obtaining regulatory clearances.
"Actually in a growth economy like India, the issues are that either projects are delayed or the cash flow gets delayed because some of the approvals don't come... Few supply agreements don't happen. But as those issues get sorted out... underlying demand exist, these projects are able to service debt in long run", she added.
Expressing concerns over rising bad loans, former Finance Minister Pranab Mukherjee had earlier asked the banks to take steps to manage their NPAs which has grown on account of economic downturn. Gross NPAs of public sector banks rose to 3.3 percent in 2011-12.
Falling growth rate of economy and manufacturing sector is likely to impact the corporates and will have a bearing on their ability to service debts.