Amid the ongoing controversy regarding default on loans by industrialist Vijay Mallya, finance minister Arun Jaitley said they do not want to “overstate” the NPA (non-performing assets) crisis, which may impact the overall lending activity of banks and rather look into the misconduct of some individuals.
“We don’t want to create a situation where we overstate the crisis and in this process the whole activity of lending for growth starts suffering because we will become extraordinarily defensive. So it is some category where there has been prima facie misconduct, which has taken place by the individual which have to be looked into,” Jaitley told reporters after the Board meeting of the Reserve Bank of India.
The minister said the category of “individual misdemeanours” will have to be treated differently in the investigative setup.
Reserve Bank of India Governor Raghuram Rajan concurred with the minister, saying that they will not indulge in a “broad fishing expedition” as it may affect furnishing of loans by banks and in turn hamper the investments.
“We have to be careful as we go forward that we penalise criminal action but that’s not what the regulator but the judiciary at has to be taken up. But we don’t want to indulge in a broad fishing expedition which then becomes a reason for banks to get worried about making loans which then will hamper the recovery and hamper the investments to be made in infrastructure. So as a country and as a system we have to draw that balance very carefully,” Rajan said.
Jaitley further said that cleaning of balance sheets will take place over the next few quarters on account of revival of sectors which have slowed down due to weak economic environment.
Public sector banks’ (PSBs) bad loans increased by Rs 94,666 crore in first nine months of the current financial year, with gross NPAs having risen to Rs 3,61,731 lakh crore in December 2015 from Rs 2,67,065 lakh crore in March 2015.
On the issue of recapitalisation of
PSBs, Rajan said the amount of Rs 25,000 crore is a “reasonable sum”. He further added that consolidation of some banks is being discussed.
“Consolidation is a process which is being discussed as it doesn’t happen overnight. I hope we find good candidates for the merger. Certainly there is rationale for merging some of the banks. We need as many banks for following a similar strategy as we have. Whole sort of partners are going to be involved, the bank board bureau or maybe a committee. We are taking into account all these things,” he said.