Bad loans: Planning more steps to empower banks, says Jaitley

After writing off Rs 53,100 crore in the 2014-15, banks are expected to write off another Rs 52,227 crore this year, as per data from India Ratings.

By: ENS Economic Bureau | New Delhi | Published:February 13, 2016 2:21 am
New Delhi: Union Minister for Finance Arun Jaitley interacts with the media on the volatility of the  share market in New Delhi on Friday.Shaktikanta Das, Secretary, Department of Revenue is also seen. PTI Photo  by Vijay Kumar Joshi(PTI2_12_2016_000055A) *** Local Caption *** Union Minister for Finance Arun Jaitley interacts with the media on the volatility of the share market in New Delhi on Friday. Shaktikanta Das, Secretary, Department of Revenue is also seen. (Source: PTI)

Finance Minister Arun Jaitley on Friday said the government is considering more steps to empower banks to recover bad loans and the problem will be contained soon. He said the government is committed to fulfil the capital needs of the public sector banks.

“The bankruptcy law is under active consideration. The government is also considering some further steps to empower banks to be in a position to recover these monies (non-performing assets),” Jaitley said in a post uploaded on the finance ministry’s Youtube channel.

“I think it’s (rising NPAs) a problem which will soon come under control,” he said.

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The government introduced the Insolvency and Bankruptcy Code in Parliament last December, which was later referred to a 30-member joint Parliamentary panel. The bill aims to speed up corporate insolvency process, free up banks’ resources for other productive uses, boost credit markets by providing for faster liquidation and help banks arrest NPAs.

The Reserve Bank of India has empowered banks to recover loans through various policies, he said. “These are the loans, which have earlier in point of time given by these banks and as a part of prudent policy it has been considered the balance sheets should be transparent. The banks are going to take all steps possible to recover the loans from debtors,” he said.

In the last three years, public sector banks have written off Rs 1,14,000 crore as reported by The Indian Express on February 8. After writing off Rs 53,100 crore in the 2014-15, banks are expected to write off another Rs 52,227 crore this year, as per data from India Ratings.

Loan write-offs in the first half of 2015-16 were Rs 25,000 crore. With this, banks would have written off Rs 2,77,400 crore in the last ten years with more than half the write-offs happening in the last three years. Gross non-performing assets, or bad loans, are expected to jump 31.48 per cent in the fiscal ending March 2016 to Rs 4,26,400 crore from Rs 3,24,300 crore.

RBI Deputy Governor SS Mundra on Thursday said the proportion of stressed assets surged to 14.1 per cent as of September 2015, up from the 13.6 per cent in March. For state-run banks, the overall stress stands at 17 per cent, while for private ones it is 6.7 per cent and 5.8 per cent for foreign lenders. Stressed assets comprise of non-performing assets (NPAs), restructured loans as well as written-off accounts.

Pointing to some over reactions to reports in the section of media with regard to the state of the public sector banks, the Finance Minister said, “in any case the volume and extent of the problem should not be exaggerated so as to lead to any panic.”

With regard to capital requirements of PSU banks, Jaitley said “the government is fully committed to support public sector banks by providing whatever capital requirements are there.” He said PSU banks have played very important role in supporting the Indian economy.

Last year, the government had announced a revamp plan ‘Indradhanush’ to infuse Rs 70,000 crore in PSU banks over four years, while they will have to raise a further Rs 1.1 lakh crore from the markets to meet their capital requirements in line with global risk norms Basel III.