Terming rising stressed assets in the banking system as a ‘core area of concern’, Finance Minister Arun Jaitley has said that government will expeditiously work with the banking system to strengthen it. He added that the Centre is working towards strengthening its ability to support the banks through greater resource mobilization. He assured top bankers that when it comes to finding resources to support the banking system, which provides a lifeline to the Indian economy, the government will always be there with them.
Jaitley further stated that the government has been very supportive with interventions like promulgating the Insolvency and Bankruptcy Code (IBC), and amending or altering other provisions in statutes in consultation with the Reserve Bank of India (RBI). On the IBC, where RBI has mandated banks to resolve 12 large accounts representing over a fifth of the total stock of NPAs, Jaitley said he expects some early harvests soon because of the institutional mechanisms being created. Besides, he also asked stakeholders to repose trust in the institutions being created, and added that speed is of essence while dealing with the stressed asset problem.
These statements came in the context of public sector banks needing capital to provide for the rising bad loans as well as to comply with Basel-III norms, which are aimed at improving the banking sector’s ability to absorb shocks arising from financial and economic stress. Banks are facing mounting non-performing assets (NPAs) or bad loans to the tune of Rs 8 lakh crore of which public sector banks (PSBs) alone account for Rs 6 lakh crore. The bank NPAs are skirting the double digit mark at present and expected to grow further.
