Will put banking sector back on track: Piyush Goyal
17 May 2018
Railway minister Piyush Goyal, who holds temporary additional charge of the finance ministry, said on Thursday the banking sector, which has a legacy of scandals and bad debts that threaten the broader economy, would be put back on track.
Goyal was referring to the loans given during the previous UPA government, which many borrowers, particularly from the power, steel and telecom sectors, have been unable to repay due to sectoral issues in a slowing economy.
Moreover, scandals involving banks that have come to light have hurt the image of banks.
At a meeting with heads of public sector banks today, Goyal said, "We will ensure very orderly growth of the industry and highest levels of probity and accountability that is expected of public sector banks," he said after the meeting.
Goyal said even though the country’s banking sector has been facing immense strains due to rising NPAs, the government is trying to get the sector back on its feet.
"With the intelligent efforts of all my colleague bankers, lakhs of employees of public sector banks and all the stakeholders of banking system, under the guidance of RBI, we will ensure very orderly growth of the industry and highest levels of probity and accountability that is expected of public sector banks," Goyal said.
Till 31 December 2017, gross NPAs of scheduled commercial banks due to industrial loans were recorded at Rs 6,09,222 crore.
These bad loans account for 20.41 per cent of the gross advances. The services sector account for 5.77 per cent or Rs1,10,520 crore, and agriculture and allied sector 6.53 per cent or Rs69,600 crore, The Hindu reported.
Rs14,986 crore come from other non-food credit and Rs 36,630 crore (2.01 per cent) from retail loans, it added.
"Indiscriminate lending of the past has caused this distress that the banking sector is facing."
Under the new rules for bad debt resolution that the RBI implemented in March 2018, banks can no longer resort to various loan restructuring schemes to delay the recognition of non-performing assets (NPAs).
Although banks have recognised many loans as NPAs following an extensive inspection of loan books by the RBI in 2015, they still hold large volumes of restructured loans, a large share of which will become bad debt in the coming quarters.
Most of the existing restructured assets are legacy loans originated in 2009-12, largely to infrastructure-related sectors, such as construction and power.