Eurozone agrees to lend Spain up to 100 bn euros
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Spain said it would specify precisely how
much it needs once independent audits report in just over a week
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Reuters / Brussels/Madrid Jun 10, 2012, 10:34 IST
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Euro
zone finance ministers agreed on Saturday to lend Spain
up to 100 billion euros to shore up its teetering banks and Madrid said it would specify precisely how
much it needs once independent audits report in just over a week. After a 2
1/2-hour conference call of the 17 finance ministers, which several sources
described as heated, the Eurogroup and Madrid
said the amount of the bailout would be sufficiently large to banish any
doubts. "The loan amount must cover
estimated capital requirements with an additional safety margin, estimated as
summing up to 100 billion euros in total," a Eurogroup statement said. Spain said it
wanted aid for its banks but would not specify the precise amount until two
independent consultancies - Oliver Wyman and Roland Berger - deliver their
assessment of the banking sector's capital needs some time before June 21.
NEW DELHI, JUNE 9:
The Finance Ministry is worried that banks' bad loans will go up, especially if credit growth slows down.The gross non-performing assets of public sector banks have exceeded three per cent for fiscal 2011-12. NPA management will be one of the key issues at a meeting the Finance Minister has called with chiefs of public sector bank and financial institutions on June 12.The agenda note for the meeting says: “As informed by the Reserve Bank of India, at system level, new accretion to NPAs has been much more than the reduction on existing NPAs due to lower level of upgradation and recoveries. Also, despite write-offs, gross NPAs have continued to rise significantly.”
WHEN REJIGS DON'T HELP The note added that
banks have restructured a large number of accounts and, in case these
restructurings, including those done under the corporate debt restructuring
(CDR) mechanism, do not lead to the desired turnaround, there could be further
accretion to NPAs. Going, forward, banks
may face further deterioration in asset quality if credit growth slows. The note mentions that
gross NPAs increased more for the SBI group than other nationalised and private
sector banks. In fact, SBI is on top in the list of gross NPAs for fiscal
2011-12. Smaller nationalised banks have done better in managing NPAs.The agenda notes the
various tools available for prevention of new NPA accretion. These include
checking fresh slippage and tough steps against wilful defaulters. The RBI's
master circular, issued last year, talks about penal measures, not granting
additional facilities, debarring promoters of defaulter companies from floating
new ventures and complaints against the defaulters' auditors. The note says: “It has
to be ensured that the recoveries are followed up ruthlessly to ensure at least
20 per cent of the amount is recovered in each quarter starting from the 4th
quarter of 2011-12. Similarly, the earlier practice of obtaining post-dated
cheques may be replaced with the system of ECS debit authorisation.”
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