Prime Minister Manmohan Singh on Friday said Indian banks are 'well-capitalised' to provide for increased bad loans till they become performing.
"Our banks are fortunately well capitalised much above the Basel norms. They have the capacity to provide for any non-performing assets until those assets have turned around," Singh said while making a statement in Parliament.
"The question that need to be asked is that whether there is liquidity problem or a solvency problem. My belief is that there is liquidity problem," he said.
"Many of the projects are not unviable but are only delayed...as these projects come on stream, we will generate revenue and repay loans," he said.
Indian banking sector has seen some rise in bad loans, he admitted.
Gross non-performing assets (NPA) of public sector banks rose to Rs 1.76 lakh crore at the end of June quarter from Rs 1.55 lakh crore at March 31, 2013.
The stress on the asset quality is a reflection of the stress in the economy of the country.
Public sector banks had recovered Rs 1,905 crore by filing 97,701 suits in 2012-13 and Rs 1,700 crore through 79,117 suits in the earlier fiscal.