‘Reckless lending during UPA regime led to NPAs’

NEWDELHI:Union finance minister Arun Jaitley on Thursday said the government was bringing in all possible resources to resolve the issue of bad loans of public sector banks and maintained that it was public investment that enabled the country to get over 7-percent growth when private investment was dismal.

Responding to a discussion in the Rajya Sabha on the state of the economy, Jaitley said it was reckless lending by banks during the boom years in the previous UPA government that had led to the accumulation of such huge non-performing assets (NPAs)or bad loansinthe Indian banking system.

“As regards the banking system, we are trying to put all our resources into it (NPAs issue),” he said.

Referring to the ~2.12 lakh crore recapitalisation plan for state-run banks approved by the government in October, the finance minister said the objective is to ensure that the lenders’ ability to support growth is not impacted by their combined NPAs which have crossed ~7.5 lakh crore.

“Reckless lending without proper risk management has

affected the banks’ capacity to support growth,” he said, referring to the high-growth period after 2008 when the massive lending by banks is now being reflected in their accumulated bad loans and through heavily leveraged corporate balance sheets.

“This is another reason which

has contributed to reduced private investment,” he added.

According to the American rating agency, S&P-owned Crisil, Indian banks will need to take a haircut of up to 60 per cent on their bad loans to resolve the issue of NPAS, which is holding up higher economic growth.