Industry body CII has prescribed a six-point action agenda, including dilution of the government holding to 33% and monetising performing loans to garner more capital, for easing the public sector banks’ non-performing asset (NPA) overhang and accelerate the credit growth. To address the NPA problem, the government on October 24 decided to bolster PSBs’ capital by 12.11 lakh crore through FY19, a move that analysts said would accelerate fresh advances by PSBs. “These reform measures may nudge the credit growth to double digits which will be a very welcome change for the banking sector and the economy,” said Chandrajit Banerjee, director general of the CII.
To create momentum for the credit growth, the CII has suggested that over the next three years, the government could consider bringing down its stake in most PSBs to 33%. To address the mismatch between short-term funds and long-term loans, it suggested banks could re-finance their infrastructure portfolio through infrastructure debt funds. The CII has suggested that government-guaranteed `1.35 lakh-crore recapitalisation bonds could be re-issued by banks to public and institutional investors including pension funds. It has also asked the government to infuse more funds from the Budget than earmarked under the Indradhanush scheme.