NPA Recovery Will Be the Top Challenge for New Upcoming Government

The new Central government will undertake a thorough review of the public sector banks (PSBs) soon after taking office, sources said.

According to the sources, with the announcement of elections, it has been decided to hold the review meeting of banks only after a new government is in place.

The review will study plans for the recapitalisation of banks besides taking note of their NPA (non-performing assets) recovery target as well as the next merger exercise.

The review meeting will be held in July now though the groundwork on the bank consolidation and NPA trimming would continue at official level during the interim period as well as it does not require approvals and there will be action on these.

On the merger front, the government is closely watching how the Bank of Baroda-Vijaya Bank-Dena Bank merged entity is working out.

Sources said some other combinations are already in process but since to proceed on concrete proposals, it needs the approval of the government panel on bank mergers, no movement can take place.

With this, the government has spent a total amount of Rs 1.06 lakh crore set aside for capital infusion in public sector banks for the current financial year.

On the performance of banks, six banks have come out of the RBI weak banks framework of PCA -- prompt corrective action -- after capital infusion while many like the SBI, and the PNB have reported robust profits. Their Q4 results are awaited.

The Bank of India (BoI), the Bank of Maharashtra, the Oriental Bank of Commerce, the Corporation Bank and the Allahabad Bank are out of the PCA framework.