Finance Minister P. Chidambaram Saturday said non-performing assets (NPAs) of public sector banks (PSBs) have risen marginally in the last fiscal and there is nothing alarming about it.
"NPAs have risen marginally for the year ended March 2012. The situation is not alarming. NPAs reflect a slowdown in the economy, but it is very marginal," Chidambaram told reporters here after meeting with chiefs of PSBs.
"For all the public sector banks, their NPAs for the year ended March 2012 stood at 3.17 percent. I am confident as the economy picks up we will be able to improve the NPAS. Their is enough profit for taking care of gross NPAs."
This was the first meeting between Chidambaram and the chiefs of PSBs since he took over the charge of the finance ministry Aug 1, 2012.
With the economy slowing down and some parts of the country experiencing drought, there are fears the NPAs would rise, affecting the health of the PSBs.
PSBs' NPAs have gone up to 3.3 percent in 2011-12 from 2.3 percent in 2010-11.
The Prime Minister's Economic Advisory Council (PMEAC) Friday revised downwards its economic growth projections for the current fiscal to 6.7 percent from the earlier 7.5-8 percent.
Earlier, the Reserve Bank of India (RBI) had lowered its growth projection for 2012-13 to 6.5 percent from 7.3 percent estimated earlier.
According to Chidambaram, there was no danger of farm loan default.
"Sixty percent of the farm loans have availed the three percent interest subvention scheme that we provide over the nominal interest rate of seven percent. This means that 60 percent of all farm loans do not default," Chidambaram said.
"Its only the rest 40 percent of the farm loans that have to give a seven percent interest rates."
The finance minister assured that all PSBs have been asked to aid farmers in drought-hit areas and that all possible credit will be provided to them.
"All bank chairmen have told me that they are fully geared to meet the requirement of farmers in the drought affected areas. Short-term loans are being rescheduled as medium term loans, new loans will be given for replanting for an alternate crop," Chidambaram said.
"Credit will be provided for fodder, for cattle and banks are fully geared to meet the requirements of the drought affected areas."
The agriculture credit target for the current fiscal stands at Rs.575,000 lakh crore, which is expected to cross the Rs.6 lakh crore mark.
Last fiscal, loans to the agriculture sector stood at Rs.509,040 crore against the target of Rs.475,000 crore.
Chidambaram added that the country's financial system is strong. "It was all together a re-education for me about the state of our banking industry. I am very proud that the backbone of our economy is the financial sector and the spine of that backbone is our public sector banks."