Arun Jaitley says stressed bank assets a 'concern' for economy

Arun Jaitley

Arun Jaitley

Finance Minister Arun Jaitley promised on September 20 that the government is taking all the necessary steps to revive the Indian economy after the country's gross domestic product (GDP) slumped to a three-year low of 5.7 percent in the June quarter.

This observation comes in the backdrop of public sector banks needing capital to not only provide for their huge bad loans, but also meet their capital requirements under the Basel-III capital accord.

"The government certainly stands one with the banking system".

While credit goes to the banking sector for financial inclusion as well as handling demonetisation drive successfully in a few weeks, Jaitley noted that stressed assets are core area of concern for the banking system.

But even as he said so, Jaitley admitted that there is a problem of private investment.

India's public sector banks have almost Rs 6 lakh crore in non-performing assets. The bank NPAs are skirting the double digit mark at present and expected to grow further.

The government is also likely to infuse an additional Rs 25,000 crore into recapitalising state-run banks in addition to the Rs 15,000 crore already budgeted.

With share prices of the banks being depressed due to high percentage of dud loans, there is a higher likelihood of the government investing itself in the PSU lenders. "It has been the major challenge with regard to the increasing number of stressed assets".

He said the government has been very supportive with interventions like promulgating the IBC, and amending or altering other provisions in statutes in consultation with the Reserve Bank.

He asked stakeholders to repose trust in the institutions being created, adding that speed is of essence while dealing with the stressed asset problem.

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