New Delhi: Concerned over "unacceptable" NPA levels, Finance Minister Arun Jaitley On Monday discussed with PSU bank chiefs the issue of wilful defaulters and said that the lenders have all the powers and autonomy to deal with them.
In the second quarterly performance review in six months, Jaitley brainstormed with SBI Chairperson Arundhati Bhattacharya and other PSU bank heads as well as RBI officials over the rising bad loans in different sectors including steel, credit off take, health of the lenders and status of social security schemes.
The gross Non-Performing Assets (NPAs) of Public Sector Banks rose to 6.03 per cent at the end of June, as against 5.20 per cent in March this year. The meeting had secretaries of various departments making presentations on the credit requirements for projects in the sectors under them.
"When we took assessment of certain sectors which had a higher level of NPAs, some particular defaulters which are common thread running across several banks did crop for discussion," he told reporters after the meeting.
The public sector banks, he said, "have all the powers...Banks today have full authority and autonomy to take action against them (defaulters).” Jaitley was replying to a question on State Bank of India declaring Vijay Mallya a 'willful defaulter' for not paying nearly Rs 7,000 crore loans to the long-grounded Kingfisher Airlines.
While the Reserve Bank has empowered the banks to deal with defaults, a bankruptcy law in the offing will help redress the problem to a large extent. "These are all a part of those steps, which are going to continuously empower the banks so that they can undertake their effective banking," Jaitley said.
Referring to the problems faced by the steel and aluminium sector due to global slump, he said: "Secretary, Department of Financial Services, would be coordinating further discussions between the banks and Department of Revenue as to what other proactive policy steps are required.”
Major stress of the banks will ease once the sectoral issues are sorted out and economy improves, he said. Jaitley said the health of PSBs is a key issue, as the carried over problem of the past continues to persist and relates to unacceptable level of NPAs and impaired assets.
"We did have a discussion almost in relation to certain specific banks also. The overall health of the economy and how various sectors are doing because part of the stress was also caused on account of factors which are attributable to certain sectors," he said.
The minister said that the banks are conscious of the fact that they have to sort out "account by account" issues relating to a certain category of their own debtors. "Now that the growth rates are somewhat picking up and therefore the pressures of the past need to be removed as far as possible," he said.
Exuding confidence that situation is going to improve for the better within a reasonable time, Jaitley said the pick up in credit off take and the recoveries of bad loans would help. Besides, the series of steps announced by RBI, which some of the bank have been implementing, will certainly improve on the quality of those assets.
"The government also has been extremely proactive in responding to each of the sectors. Results of these don't come overnight. Once the process has been set into motion, which was staggering for a reasonable period of time, I think the situation will improve significantly in a reasonable time," he said.
As regards direct transfer of subsidy, Jaitley said more than 12 crore people are getting cooking gas subsidy and nine crore are getting MNREGA salary through the direct benefit transfer (DBT) platform.
He also said that government has infused Rs 20,000 crore capital into the PSU banks as the first tranche of capital infusion under the 'Indradhanush' programme.
On when does he expect loan growth to pick up, the minister said: "The economy is gradually picking up and therefore as demand picks up, certainly that off take itself will also pick up."
Stating that the Highway sector has been put on track, Jaitley hoped that the reforms announced in power sector would reduce the stress caused by discoms. The meeting also discussed funding situations in agriculture sector, housing and urban poverty alleviation, educational loans, food processing, rural development and textiles sector.
Besides, the progress of Pradhan Mantri Jan Dhan Yojana, government's insurance sector schemes, pension scheme and the Mudra Yojna were all reviewed and the roadmap for rest of the financial year was discussed.
