Mumbai: Amidst concerns regarding the high non performing assets constraining the banking system’s ability to support growth, finance minister Arun Jaitley on Friday said the government will take all necessary measures to strengthen the bank’s balance sheet.
While addressing the 70th annual general meeting of Indian Bank Association (IBA), Mr Jaitley said improving the lending capacity of banks and encouraging private sector investments are the two biggest challenges confronting India.
“The government certainly stands one with the banking system. Whatever steps that are required to be taken to find a resolution to this problem, we will expeditiously work with India’s banking system in order to strengthen it,” he said adding that the several measures taken by the government including the implementation of the Insolvency and Bankruptcy code would help the timely resolution of stressed assets issues in the banking system.
According to a recent report by Icra, public sector bank’s advances grew by less than 1 per cent Y-o-Y during Q1FY2018. The Tier-I capital of PSBs stood at 9.7 per cent of risk weighted assets as on June 30, 2017 as against the regulatory requirements of 9.5 per cent required by March 31, 2019, indicating the limited capital cushion available to grow the advances.
The increasing regulatory capital requirements, weak internal accruals and limited capital infusion by the government according to Icra have forced PSBs to go into capital conservation mode by constraining their lending activities.
On concern regarding the weak economic growth, he reminded India’s ability to reform and grow at a reasonable pace even when the global economy was experiencing a slowdown. “India has adequately demonstrated its ability to reform. Indian has adequately demonstrated its ability to grow at a reasonable pace even when the world was going slow. Public opinion today is more supportive of reform than it ever was. And therefore, India’s ability to face challenges as they are thrown up in the economy today, I think is certainly much better, much higher than what it traditionally has been,” Mr Jaitley added.