With the Reserve Bank of India (RBI) raising an alarm bell over the growing level of bad assets and banks writing off Rs. 1 lakh crore in advances since 2000, the finance ministry has directed banks not to write off more than they can recover.
Several lenders have reported fresh slippages with higher write off and lower recoveries.
“The level of bad assets is no more comfortable though it is also largely due to the slowdown in the economy, but we need to also look into the issue rather than just blaming it on the economic situation,” a government official who did not wish to be identified said.
KC Chakrabarty, deputy governor, RBI, said over 90% have been written off for large business houses.
Insiders also said that banks need to go after big borrowers instead of retail borrowers.
The government has also asked banks to prepare regular reports on non-performing assets or NPAs.
From April 1, the RBI raised the provisioning requirements for restructured loans of banks to 5% from 2.75% after the industry witnessed a significant surge in the level of bad debt.