Rules may be eased for banks as NPAs under control: Jaitley
NEW DELHI: The government will consider easing tight regulatory control over certain poorly performing state-run banks to help improve their lending capability as the bad debt problem plaguing the Indian banking sector is now firmly under control, finance minister Arun Jaitley said on Tuesday.
The government expects to recover bad loans worth ₹1.8 trillion in the current fiscal year, the minister said. Further, state-run banks will monetize non-core assets worth ₹18,000 crore by December as part of efforts to improve their financial health, said Rajiv Kumar, secretary, department of financial services.
The blueprint for improving bank performance also includes rationalization of foreign branches and combing through all bad loans exceeding ₹50 crore to see if there is any need to investigate possible instances of fraud. Jaitley said he will examine requests from banks to ease restrictions placed under the RBI’s prompt corrective action (PCA), after a meeting with the chiefs of public sector banks in New Delhi.
The PCA framework seeks to strengthen banks while keeping them under certain restrictions, including on network expansion, dividend payment and managerial compensation. At present, 11 banks, including Dena Bank, Central Bank of India and Bank of Maharashtra, are under this framework. “We are passing through a good phase of economic growth…Consumption is up, growth figures are encouraging. Therefore, banking activity is bound to pick up. The bankers also have certain expectations which I have said we certainly will consider. Some said the PCA guidelines should be revisited,” said the minister. The government is as keen as bankers to fully utilize the cycle of high consumption, high growth, bad debt recovery and credit offtake for economic growth, Jaitley said.
Bad loans in the banking sector are declining while recoveries have picked up and lenders are confident of maintaining liquidity for financing projects, he said.