Prez Pranab Mukherjee wants banks to improve credit growth

President Pranab Mukherjee urged banks to improve their credit disbursement even amid stressed assets which have hit the profitability of the banks in the last few quarters. 

The President was speaking at the centenary celebrations of Karur Vsysa Bank in Chennai on Saturday. 

The stressed advances to gross advances of scheduled commercial banks have increased from 10.90% in March 2015 to 11.40% in March 2016, he said, adding the aggregate provisions for NPAs has increased from Rs 73,887 crore to Rs 1,70,630 crore.

The President said that stressed assets and the bank's provisions for them meant the "resources available for credit disbursement by commercial banks was affected and is not a desirable situation."

"There is a need for credit expansion in a growing economy like India," he added. 

Credit outflow of the banks has taken a hit in the last few quarters with banks being more vigilant and wary about giving loans and a drop in the investment sentiment as growth around the globe slows. 

While Mukherjee congratulated bankers for the sector performing, he asked them "to remain prudent about the situation of NPAs."

Rising NPAs is "not a desirable situation," he said, adding those resources must be available for commercial disbursement.

Mukherjee also pointed out that former RBI Governor Raghuram Rajan had taken many appropriate steps to put the system in the right direction.

Rajan kickstarted the process of the asset-quality review of the banks that led to a surge in the disclosures of non-performing assets and bad debts. It also meant higher losses reported by the banks. He had set March 2017 as the deadline for the banks to clean up their books. 

Rajan steppoed down as the RBI governor on September 4, making way for Dr Urjit Patel to take his place as the central bank chair.