Though admitting the problem was serious, chairman and managing director of Bank of Baroda K Kannan said his bank would still manage to keep the level of NPAs under check due to higher provisioning in anticipation of the bad scenario.

Another chairman of a nationalised bank felt that the problem of higher NPAs would be inevitable during 1998-99 as a result of the cascading effect of the east-Asian currency meltdown and industrial slowdown. "Do you expect me to initiate legal action against the defaulters who have been our customers for last several decades merelydue to their current recessionary problems? They have otherwise been good clients who do not keep anything pending," the top banker requesting anonymity said.

He, however, said the only silver lining was agricultural growth which would ensure lower NPAs in the agricultural lending and make up partially for the defaults of some of corporate houses.

The NPAs of the whole industry are currently estimated at around Rs 45,000 crore which the bank unions have blamed on the imprudent lending policies of the bank management.

The Convenor of the United Federation of Bank Unions (UFBU), V K Gupta, said the RBI decision to reduce bank rate would facilitate release of funds for productive activities.

According to Kannan, the decision to reduce the bank rate by the RBI would give an impetus to the lending efforts of the banks. "The situation would definitely pave the way for a low interest rate regime," Kannan said.

According to the chairman and managing director of Allahabad Bank, Harbajan Singh, to begin withthe RBI's recent announcement would have a positive "psychological" effect in the minds of the industrial houses.

"The release of funds through reduction in cash reserve ratio as well as the reduction in the repo and the interest rates would give the industry a feeling of assured loans from lending institutions which in turn would lead to greater industrial activity," he said.

Meanwhile, State Bank of India (SBI) said it would take the initiative to set up a `credit bureau' by major banks to share information of clientile to ward off problems like bad debts, a top bank official said. "We will soon start working on a credit bureau that will help the banks avoid wilful defaulters of debts and credit cards," SBI managing director V Janakiraman said here after launching the bank's credit card here.

He said two credit bureaux - one for corporates and onefor individuals -- needed to be set up with a database on information on customers of various banks that offer credit card facilities.