Bad debts of banks at unacceptable level: FM Arun Jaitley
Finance Minister, Arun Jaitley said non-performing assets of Indian banks were at an ‘unacceptable’ level but the situation is expected to improve as the government and the central bank were taking steps to relieve stress in various sectors.
“The health of the public sector banks was a key subject, particularly in relation to the fact that a carried over problem of the past continues to persist. And that problem relates to the unacceptable level of NPAs,” Mr. Jaitely told journalists on Monday after a meeting with bankers to review their July-September performance.
The meeting was attended by the Chiefs of the public sector banks as well as Secretaries from various ministries including micro, small and medium enterprises, agriculture, textiles, and rural development.
While acknowledging that a part of the stress with the banking sector has to do with certain sectors, the Finance Minister expressed hope that the reforms announced in the power sector will relieve the problems with the distribution companies. He also added that the highways sector has started moving, and that the bankers at the meeting suggested measures to improve the situation in the beleaguered steel sector.
The gross NPAs of public sector banks were at six per cent at the end of June, up from 5.2 per cent in March. According to RBI data, stressed asset, that is gross NPA plus standard restructured advances, as a percentage of gross advances moved up to 11.1 per cent as on March 2015 as compared to 9.2 per cent two years ago. Public sector banks share a disproportionate burden of these stress.
Bankers who attended the meeting highlighted six sectors that were facing maximum stress –iron and steel, textile, power, sugar, aluminium and construction.
The Reserve Bank of India (RBI), in its financial stability report, also cited five sub-sectors that were undergoing maximum stress, which are infrastructure, iron and steel, textiles, mining (including coal) and aviation.
According to the RBI data, these five sub-sectors had 52 per cent of total stressed advances of all commercial banks as of June 2014, whereas in the case of PSBs it was at 54 per cent.
The government is also in the process of framing a bankruptcy code — aimed to tackle wilful default and a draft paper was recently released.
Regarding the issue of wilful defaulters Mr. Jaitley said that the lenders have the required powers and autonomy to deal with them and that the bankruptcy law, when passed, will increase the banks’ abilities to get failed creditors to exit. The government is planning to table the Bankruptcy Bill in the winter session of the Parliament.
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Source:Thehindu
Finance Minister Of India
