Ris­ing NPAs: banks to keep close watch on sub­sidiaries of bor­row­ing com­pa­nies

Hindustan Times (Patna) - Live - - Business - Mahua Venkatesh mahua.venkatesh@hin­dus­tan­times.com

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.


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