The major stress on state-run banks due to bad loans will progressively commence easing once issues are gradually resolved in various sectors, including implementation of reforms in the power sector, Finance Minister Arun Jaitley said on Monday.
“The health of public sector banks, particularly in relation to the carry-over of past problems like the unacceptable level of NPAs (non-performing assets) and bad loans was discussed,” Arun Jaitley told reporters in New Delhi after a meeting with heads of public sector banks (PSBs).
“The problems continue, but the banks’ NPAs situation will improve,” he said.
“Reforms in the power sector, once they are worked out, the stress posed by discoms (distribution companies) would give way. The highways sector has started moving,” he added.
He informed mediapersons that the bankers had offered specific suggestions regarding the steel and aluminium sectors.
“Problems of the steel sector and steps taken by the government in this area were discussed. The secretary, department of financial services, will coordinate steps with the department of revenue to take further steps for the banks,” the minister said.
The gross NPAs of PSBs rose to 6.03 percent at June-end, as against 5.20 percent in March 2015.
“A series of steps suggested by the Reserve Bank of India (RBI) which the banks are implementing will ease the situation. Additionally, the government has been proactive in solving problems of various sectors,” he added.
Jaitley has allocated Rs.7,940 crore in the budget for recapitalisation of PSBs during this financial year.
In this regard, the finance minister said “the first tranche of money that goes to the banks has already gone”.
Noting the massive stressed assets of the state-run banks, Prime Minister Narendra Modi had late last month said the government would infuse Rs.70,000 crore in the PSBs over the next few years.
Jaitley had in September said the government might consider reducing its stake in PSBs to 52 percent.
In Monday’s quarterly performance review with bank heads, Jaitley also discussed the issue of wilful defaulters, saying the banks have both the authority and autonomy to deal with such category of borrowers.
“When we took assessment of certain sectors which had a higher level of NPAs, some particular defaulters which are common thread running across several banks did crop for discussion,” he said.
“Banks today have full authority, autonomy and all the powers to take action against them,” he said, replying to a question on State Bank of India declaring Vijay Mallya a “wilful defaulter” for not repaying nearly Rs.7,000 crore loans given to his Kingfisher Airlines.
“The finance minister asked the bankers to get rid of their past scars of non- performing assets and clean up their balance sheet at the earliest,” the finance ministry said in a statement after the meeting.