New Delhi: Finance Minister Arun Jaitley on Monday hinted that some measures are likely to further empower state-run banks legally to help them deal with the rising bad loans.
“Various suggestions have come up for empowering the banks, functioning in an environment, so that they can deal with the situation [bad loans]. The government is fully committed to support the banks in this regard,” Jaitley said at a press conference after the quarterly performance review meeting with the heads of public sector banks here on Monday.
Jaitley said the banks have put forward suggestions to tackle the stress NPAs are creating. One of the key considerations is that the banks should be empowered and consequently protected so that they can bring about commercially prudent settlements, he said.
“I wouldn’t want to be specific at this stage. I have indicated that the discussions are with regard to empowerment of banks, protection of the banks and creating solutions,” he said.
Jaitley said at the meeting various topics like non-performing assets (NPAs), or bad loans, position, inter-operability of financial inclusion schemes, credit flow and banks’ expansion were discussed.
“One of the key subjects obviously is the credit loan and expansion of banking activity. Overall operational profit of public sector banks is significant,” he said.
“The focus of banks on NPAs [non-performing assets] must remain, but financial inclusion schemes must continue. We are supporting banks, so that they can support lending and credit growth,” he added.
Referring to the rising losses in the quarterly results of public sector banks, Jaitley said it is on account of the high provisioning that the PSBs declared a net loss of about Rs18,000 (Dh9.8 billion).
“The government also firmly believes that the NPA situation has risen on account of certain sectoral stresses. We must support the banks fully so that their ability to support growth remains,” he said.
Ten state-run banks suffered losses of over Rs150 billion in the fourth quarter that ended in March, because of provisioning made to cover for bad debt. Punjab National Bank, for instance, made an operational profit last year of Rs120 billion, but has now declared record loss because of provisioning for NPAs.
The finance minister hoped that the bankruptcy code and debt recovery legislation will significantly help the banks deal with the stressed assets.
The government has allocated Rs250 billion in 2016-17 for revamp of public sector banks.
“We have already committed Rs250 billion. We stand by that commitment,” Jaitley added.
Loans of about $120 billion (Dh440.7 billion), or 11.5 per cent of the total, are stressed at Indian banks, with the 27 public sector banks accounting for the lion’s share.
As a proportion, the gross NPAs increased from 5.43 per cent of advances as on March 2015, to 7.3 per cent as on December-end.
