Government taking measures to destress banks: Jaitley
24 November 2015
Non-performing Assets (NPAs) of Indian banks, which have risen to unacceptable levels, have been a carry-over from the past and happened partly due to stress in certain sectors of the economy to which banks had large exposure, finance minister Arun Jaitley said after a meeting with chiefs of state-run banks on Monday.
The meeting discussed the ways to bring down the current high stock of bad loans in the industry.
He said some recent, sector-specific announcements by the government were aimed at reducing this stress which should help bank NPAs and impaired assets.
Jaitley also said wilful defaults were also responsible for huge NPAs of some banks adding, "there is anyway a common thread among all of them".
The finance minister also made it clear that banks are empowered to take any decision that helps them recover NPAs. Besides, the Bankruptcy Law which is already in the works, should also help banks recover stuck assets, he said.
Gross NPAs for banks, including restructured assets, now stand close to 12 per cent - a level seen in 2002-03. The gross NPAs of 19 banks touched a high of Rs2,60,000 crore in September, up from Rs2,30,000 crore in March 2015.
Jaitley said power sector stress has been one of the reasons for bank NPAs but said the recent announcement on discoms is expected to help reduce banks' stress.
The Ujjwal Discom Assurance Yojana (UDAY), recently cleared by the cabinet, provides for a restructuring package for state electricity distribution companies which is expected to eventually save Rs180,000 crore annually.
Discoms have combined losses of Rs3,80,000 crore and are forced to fund losses with debt, power minister Pyiush Goyal said recently.
Banks' exposure to the roads sector has been another reason for rising NPAs, but Jaitley said, recent measures taken by the government to empower NHAI to sort out disputes and help road concessionaires should help financial institutions and banks, who will no longer have to treat road projects as stressed.
Besides banks' health, Monday's meeting discussed social sector schemes of the government like the Jan Dhan Yojana, pension schemes, Mudra, etc, and the contribution of public sector and private banks to these schemes.
Also presentations were made before the finance Ministry team by secretaries of the MSME, rural development, non-renewable energy and textiles to fast track banks' role in assisting growth in these sectors.
PSBs also discussed various steps being taken to improve credit growth.
The issue of passing on the benefit of rate cut was also discussed, with the PSBs noting that their base lending rates had been reduced consequent upon the rate reduction announced by the Reserve Bank.
There was a detailed and free flowing discussion on ways to develop core competence and niche banking.