Several big ticket projects related to various sectors being stalled owing to lack of environmental clearances, has become a grave area of concern for public sector banks as this has led to an increase in their non-performing assets (NPAs), even as the Government has been singularly blaming the corporate sector for the rise in bad loans of the State-owned financial institutions.
According to sources, in a meeting held by Finance Minister P Chidambaram with heads of PSU banks to review their performances earlier this month, rising NPAs of these banks was the focal point as the financial institutions are understood to have indicated to him that as many as 253 major projects worth Rs 12 lakh crore are stuck owing to lack of green signal from the Ministry of Environment and Forests (MoEF).
Due to this, the NPAs have gone up sharply for public sector banks and sources privy to the development said that the banks chiefs expressed their deep concern over the situation. Though Chidambaram had said after the review meeting (which was held on March 5, 2014) that PSU banks have been asked to focus on recovery of bad loans which happen to be high among large corporate accounts, sources pointed out that stalled infrastructure projects too are major contributors to NPAs.
Ever since Petroleum Minister M Veerappa Moily took over the additional charge of the MoEF in late December 2013, he has been on a clearance granting spree and till February 2014, 147 projects worth Rs 5 lakh crore had been cleared by the Government. Despite this, 253 projects worth Rs 12 lakh crore are still awaiting environmental clearance and this reflected on PSU banks’ NPAs.
While Chidambaram as well as the RBI have been expressing concern over the deteriorating asset quality of banks and have been focussing on expediting recovery of bad loans especially from the corporate sector, the fact that various Government projects are stuck owing to delay in green clearances which too has resulted in rising NPAs of these banks, is something which seems to have been side-stepped.
Despite Government’s best efforts to put major infrastructure projects related to various sectors like coal, power, energy, mining, railways and highways - on fast track by setting up the Cabinet Committee on Investment (CCI) under Chairmanship of Prime Minister Manmohan Singh as well as forming a Project Monitoring Group (PMG) under the aegis of the Cabinet Secretariat, the situation would take some time to improve.NPAs PSU banks rose by 28.5 per cent from Rs 1.83 lakh crore in March, 2013 to Rs 2.36 lakh crore in September 2014.
PSU banks recovered Rs 18,933 crore worth of bad loans during the April-December period of 2013. They have been monitoring their top 30 bad loan accounts for quite some time now. However unless major infrastructure projects don’t start taking off on time, bad loans are likely to remain a worry for state-owned banks.
PMG Chairman Anil Swaroop had said in January this year that projects related to coal mining and evacuation formed the biggest chunk of the stalled projects followed by ones that were stuck because of non-availability of forest or environmental clearances. While the PMG has managed to clear major power sector projects and some 70,000 MW worth coal related projects, the overall situation would take time to improve, industry observers said.