"Genuine defaulters and willful defaulters need to be dealt with separately. We have to be strict with willful defaulters," Chidambaram said in an address to the Parliamentary Consultative Committee attached to his Ministry. He said that bankers have been told to be sympathetic and have a ‘humane approach’ towards genuine defaulters.
"This is time for hand-holding of borrowers who are facing difficulties, especially industry," the Finance Minister added. The NPAs of public sector banks rose to 3.84 percent of advances at the end of March from 2.32 per cent in March 2011.
The NPAs of banks in the agriculture sector was at 5.46 percent, in MSME at 5.82 percent, in the corporate sector at 3.44 percent, in retail loans at 2.37% and real estate at 1.92 percent.
The Finance Minister said that levels of NPAs are critically dependent on the performance of the economy. If economic growth was at 8 to 9 percent, then NPAs would be low.
Chidambaram further said that banks must ensure that credit flows to every sector of industry. He also said that banks need capitalization to meet their enhanced lending, which is increasing every year. This year, the government has made provisions of Rs 14,000 crore for bank recapitalization.
Chidambaram said that banks normally make their own arrangements to meet capital requirements, both through their own resources and from the market.