NEW DELHI: Public sector banks, which have witnessed a surge in the level of non-performing assets (NPA) — loans that do not yield any results — and eroding bottom lines, may be exempt from paying a minimum dividend to the government for a limited time period, sources said.
“At a time when the government is looking to inject a huge sum of money as part of its recapitalisation exercise, the area of dividend will be relooked especially as the state-owned banks are expected to increase lending,” an official source who did not wish to be identified told HT.
At present, the NPA level of the state-owned banks is over 6% of the total advances.
As per the finance ministry, a sum of about `1,80,000 crore over and above the average profits they make will be required by the state-owned banks in the next three years. Of this, the government has decided to infuse `70,000 crore by 2018.
The finance ministry and the Prime Minister’s Office are closely watching the performances of banks about NPAs and over recovery. “Stringent measures need to be taken to reduce the NPA level in the banks, there has been reckless lending by the banks in the past, and the government now wants them to take more prudent decisions on lending,” a senior finance ministry official said.