Rising NPAs is making public sector banks unfit for private Provident Fund deposits

Surging Non-Performing Assets (NPAs) have rendered public sector banks such as State of India (SBI), Punjab National Bank (PNB) and Canara Bank unfit to take deposits from non-government Provident Funds (PF). As per the current rules governing investments by PFs, non-government Provident Funds (PF) are barred from being deposited in a commercial bank in case the NPAs of that bank exceed 2% of net advances. The Indian Banks’ Association (IBA) has requested the Union Finance Ministry to relax the norms pertaining to deposits by non-government provident funds and gratuity funds in scheduled commercial banks.

Conditions banks are required to meet for taking PFs deposits:

  • Continuous profitability for immediately preceeding three years
  • Maintain minimum capital adequacy of 9%
  • Have net NPAs of not more than 2% of net advances
  • Maintain minimum net worth of not less than Rs 200 crore

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Categories: Banking Current Affairs 2017

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