Rising NPAs: banks to keep close watch on subsidiaries of borrowing companies
Banks, which are saddled with high level of non performing assets (NPAs) will soon start tracking the finances and operational performances of sister and associate firms of companies to which they lend. The move is expected to help banks identify “problems” or “frauds” at an early stage. Besides, banks will also monitor the expenditure pattern of borrowing firms.
Sectors such as micro small enterprises (MSE) and education account for the bulk of bad loans.
“The NPA levels have risen and this is a cause for concern. Banks will have to keep an eye and track the performances of the associate and subsidiary companies of the borrowing company,” a senior government official told
Recently, the Central Vigilance Commission (CVC) undertook a study of the top 10 defaulting companies to identify the problems that lead to such situations. “We have concluded the study that we undertook to understand the situation of defaulting companies. We have sent our recommendations to banks,” said TM Bhasin, vigilance commissioner.
Kingfisher Airlines, Bhushan Steel, Winsome Diamond and Jewellery Co are among those that have been listed as defaulters. Top 10 defaulters account for `28,152 crore of NPAs. Over 430 borrowers have taken loans of `1,000 crore, amounting to `16.31 lakh crore, the finance ministry said.
Lenders and the RBI monitor all loans accounts, especially those above `5 crore.