More power to banks to recover bad loans: FM

SansadTV Bureau
File Photo: Reserve Bank has often asked banks to clean up their balance sheets in recent times.

File Photo: Reserve Bank has often asked banks to clean up their balance sheets in recent times.

Finance Minister Arun Jaitley today said that the government was considering more powers for public sector banks to recover bad loans. Bad loans or non performing assets of public sector banks have crossed an alarming level of over Rs. 3 lakh crore or 4.62% of total advances of banks in March 2015.

“The bankruptcy law is under active consideration. The government is also considering some further steps to empower banks to be in a position to recover these monies (non- performing assets). I think it’s a problem which will soon come under control,” he told reporters at the North Block.

Observing that there is a problem of NPAs, he said “these are the loans, which have earlier in point of time given by these banks and as a part of prudent policy it has been considered the balance sheets should be transparent. The banks are going to take all steps possible to recover the loans from debtors.”

He said Reserve Bank through various policies have empowered banks to recover NPAs.

As on September, the gross NPAs of PSBs have increased to Rs 3.01 lakh crore as against Rs 2.67 lakh crore in March. Pointing to some over reactions to reports in the section of media with regard to the state of the public sector banks, the Finance Minister said, “in any case the volume and extent of the problem should not be exaggerated so as to lead to any panic.”

Yesterday, Reserve Bank Governor Raghuram Rajan also assured that there won’t be a repeat of the asset quality review (AQR) that has shaved off banks’ bottom-lines and the resultant battering of banking stocks and the massive erosion of investor wealth.

“We do not envisage a sequence of AQRs,” Rajan had said. Using a medical jargon to impress the need for such a review, Rajan said a “deep surgery” is needed to clean up and the process of recognising the NPA is akin to an “anesthetic” needed for the procedure.

With regard to capital needs of state-owned banks, Jaitley said “the government is fully committed to support public sector banks by providing whatever capital requirements are there because these banks have played very important role in supporting the Indian economy and their support is also required for supporting further growth.”

(With inputs from agencies).