Bad loans behind increase in bank losses: Jaitley

RSTV Bureau
File Photo: Finance Minister Arun Jaitley.

File Photo: Finance Minister Arun Jaitley.

Committing to provide more funds for recapitalisation of state-owned banks, Finance Minister Arun Jaitley today said that cumulative losses of Rs 18,000 crore suffered by them last fiscal were mainly on account of higher provisioning for bad loans.

Public sector banks (PSBs) actually made operating profits of Rs 1.40 lakh crore in 2015-16, he said, indicating that their performance was not as bad as being projected.

Talking to reporters after a high-level meeting to review the performance of the banking sector, Jaitley said the government had earmarked Rs 25,000 crore for recapitalisation of the state-owned banks and would provide more funds if needed.

“The overall operational profit of the PSBs last year was quite significant. It was in the excess of 1.40 lakh crore… It is on account of the provisioning that overall the PSBs declared a net loss of about Rs 18,000 crore and a significant amount of provisioning having been made in the last two quarters of the fiscal,” Jaitley said.

Besides Non Performing Assets (NPAs) or bad loans, the meeting reviewed the progress of financial inclusion schemes like Stand-up India and Mudra, credit flow to the industry and expansion of the banking sector.

With regard to specific suggestions on recovery of bad loans, Jaitley said the discussions centered around empowerment of banks, protection for bonafide decisions taken on commercial consideration and finding a resolution or taking solution-oriented steps.

He said “candid discussions” were held on various subjects and the bank CEOs came up with various suggestions with regard to empowering the banks to deal with NPAs and improving the environment wherein commercially prudent decisions could be taken.

The government, he said, “is fully committed to supporting the banks in this regards. The Bankruptcy and Insolvency Code has already been enacted. It will become operational soon.

“Another set of amendments to the debt recovery legislation and the securitisation legislation are before Parliament. The joint committee is considering them…we hope to further empower the banks (to deal with NPAs).”

He added that the government would examine various other suggestions for resolving the problem of stressed assets which came up during the meeting.

“One of the key considerations was that in situations like these banks should be empowered and consequently should be protected so that they can bring about…prudent settlements,” Jaitley said, adding the Indian Banks’ Association would come up with some specific suggestions which could be acted upon by the government.

As regards the rising level of bad loans of the banking sector, Jaitley said: “The government firmly believes that the NPA situation have risen on account of certain sectoral stress… we must support them fully so that their ability to support growth remains sound.

“Any kind of empowerment and protection, which we have candidly discussed today… if it comes up in the course of subsequent suggestions by the IBA, the government would be open to considering it.”

On the issue of recapitalisation of banks, Jaitley said the government has already committed Rs 25,000 crore in the budget and “if more funds are required, we will make them available. We stand by that commitment”.