Concerned about the high level of bad loans in the banking sector, Finance Minister Arun Jaitley said on Saturday that in some cases non-performing assets (NPAs) levels unacceptable.
Speaking to reporters after he met bankers at Gyan Sangam, Arun Jaitley said, “There is unacceptable levels of NPAs in some cases and banks must be given some leeway in dealing with commercial issues with a commercial mindset.”
According to RBI’s Financial Stability Report released recently, public sector banks (PSBs) continued to record the highest level of stressed advances at 12.9% of their total advances in September 2014 followed by private sector banks at 4.4%.
Capitaline data also showed that the level of NPAs in the banking system as on September 2014 stood at more than Rs 2.7 lakh crore.
Therefore, he added, the government is giving a very high priority to the conclave and is listening to various experts and bankers.
“I’m sure this 2-day interaction is certainly going to pave way for a new roadmap,” Arun Jaitley added.
The minister also stressed on the need for banks to fund infrastructure and manufacturing sector in order to achieve higher growth.
“There is a need now for the banking system in India in a big way to finance infrastructure, manufacturing, infuse liquidity. There is also a need to conceive several reforms in the banking sector,” he said.
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Recently the Reserve Bank of India said in a notification that banks can also fund existing projects under the 5/25 scheme paving the way for further flexibility in lending to the infrastructure sector.
The 2-day banking conclave being held here has the presence of all CMDs and EDs of public sector banks along with officials of the finance ministry and RBI.
Arun Jaitley also said that there is a need to give further autonomy to banks and a need to understand what problems lenders are facing.
Jayant Sinha says credit offtake will happen
The government is hopeful that credit offtake will happen in the next few months as the economy improves, minister of state for finance Jayant Sinha said on Saturday.
Speaking to reporters on the sidelines of Gyan Sangam, sinha said, “As the economy improves the interest rates come down which will certainly happen in the next few months, I am very hopeful and sure in fact that credit offtake will improve.”
He added that credit offtake depends on multiple factors, and it has to do with economy, with interest rates, with consumer demand.
“It depends on multiple factors. There is also an overhang off NPAs which has been higher in the public sector than private sector,” Sinha explained.
Non-food credit, or loans given to companies and individuals, grew at a subdued 10.93% year-on-year for the fortnight ended December 14, taking the outstanding credit in the system to Rs 61,98,242 crore, according to the Reserve Bank of India (RBI) data.
Commenting on the outcome of the Gyan Sangam, he said that the expectation is that various groups that have gathered here will provide a series of recommendations.
“We have asked for these to be bold, innovative and great in their scope. We will receive these recommendations from the six working groups here and then as the government we will take a call on when it will be practical to implement them,” Sinha said.