Curbing stressed assets, limiting exposure to global uncertainties on FSDC agenda

The Council, which is a forum for coordination among country’s financial sector regulators, discussed ways in which strong public sector companies can take over a portion of the stressed assets of weaker companies, and then revive these assets.

By: ENS Economic Bureau | New Delhi | Published:July 6, 2016 3:50 am
arun jaitley, jaitley, raghuram rajan, rajan, arvind subramanian, brexit, brexit india, rbi governor, finance minister, bad loans, bad debt, loans,  fsdc, financial stability development council, financial market, india economy, india financial market (From right) Finance Minister Arun Jaitley, RBI Governor Raghuram Rajan, Sebi Chairman UK Sinha and Chief Economic Adviser Arvind Subramanian at the 15th meeting of the Financial Stability and Development Council in New Delhi on Tuesday. (Source: PTI)

Reducing stressed assets in the banking sector and dealing with global economic uncertainties dominated discussions at the Financial Stability and Development Council (FSDC) meeting chaired by finance minister Arun Jaitley on Tuesday.

The Council, which is a forum for coordination among country’s financial sector regulators, discussed ways in which strong public sector companies can take over a portion of the stressed assets of weaker companies, and then revive these assets.

“There were discussions on reducing stressed assets, by way of say NTPC taking over such assets from another state-owned firm and then reviving it. The FSDC thought that a strategy needs to be developed in this direction,” said an official.

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“The Council deliberated on the issue of rising bank NPAs (non performing assets) wherein it noted the measures taken by government & RBI for handling the stressed assets and discussed the way forward to manage the situation,” the finance ministry said. Chief Economic Adviser Arvind Subramanian gave an overview on India’s macro-economic situation during the meeting.

The FSDC particularly noted that private sector banks’ credit growth was better than their public sector peers. “Even in case of agricultural credit expansion, private sector banks have overtaken the PSU banks. This aspect was discussed in the light of improving performance of PSU banks,” the official said.

RBI Governor Raghuram Rajan, Sebi Chairman UK Sinha, IRDAI Chairman TS Vijayan and PFRDA Chairman Hemant G Contractor attended the meeting. Finance Secretary Ashok Lavasa, Economic Affairs Secretary Shaktikanta Das and Financial Services Secretary Anjuly Chib Duggal also participated in the FSDC meet.

The Council called for continuous monitoring of the Brexit situation. “Members agreed on the need to continue to be in a state of preparedness for managing any external sector vulnerabilities, including those emerging from Brexit…,” the government said.

The Council also discussed issues relating to developing a comprehensive framework for identification of Systematically Important Financial Institutions (SIFIs). With uncertain global economy and volatility in financial markets confronting emerging economies, the Council was of the opinion that India is “much better placed” on back of improvement in macro fundamentals, slew of reforms and large forex reserves.

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