Ahead of budget, FM reviews steps so far to revive banking sector

NEW DELHI: Finance minister Nirmala Sitharaman will on Saturday review the effectiveness of the steps taken in recent months to make capital available to businesses and non-bank lenders, besides seeking the views of staterun bank chiefs ahead of her second Union budget.

Sitharaman’s meeting with bank chiefs assumes significance as she has already consulted industrialists, economists and state finance ministers over the last few days, seeking their views on how to reverse the economic slowdown as she prepares the February 1 budget proposals.

She is expected to review credit availability to various segments of the economy, the extent to which the Reserve Bank of India’s (RBI’s) monetary stimulus has been passed on to consumers by way of lower lending rates and how efficiently banks are recovering dues and turning around sinking companies.

While the banking sector is taking bold steps to recover dues from large corporate defaulters under the insolvency and bankruptcy code, its shadow banking sector is still grappling with stress. One of the items on the agenda for Saturday’s meeting is banks’ ability to quickly auction the assets of defaulters acquired under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. This law allows banks to attach the assets of defaulters without having to go to court. Toxic assets in the banking sector have been at the epicentre of the stress in the economy.

“The finance minister will meet PSB heads tomorrow (today) to review the performance of these banks and also take stock of all the steps taken by the government (toward the banking sector) since the announcement of the budget (in July),” a senior government official said in an interview on Friday.