Stemming the increase in non-performing assets (NPAs) and ways to address the issue of stalled projects, especially those pertaining to the infrastructure sector, are likely to top the agenda when finance minister Arun Jaitley meets the chiefs of public sector banks (PSB) on June 12.

Gross NPAs of PSBs, as a percentage of their advances, had marginally slipped from a high of 5.64% as on December 31, 2014, to 5.2% in Q4 of FY15. However, Jaitley had recently warned against jumping to a conclusion that the situation is getting better.

The minister said he would rather wait for the trend to continue for three or four quarters to confidently state that there is a pattern. Finance ministry sources told FE that in addition to analysing the capital requirements of these state-owned banks, Jaitley, during the meeting, is expected to discuss their performance on several fronts including financial inclusion, loans to MSMEs (micro, small and medium enterprises), agriculture credit, besides housing and educational loans. The minister had recently stressed the importance of expediting the recapitalisation of PSBs.

The government has already moved to a performance-based criteria of recapitalisation to reward efficient PSB’s with extra capital for their equity and help them further strengthen their position. Another concern will be the fall in profits of PSBs. FE had recently cited data from Capitaline to show that the net profit of 13 private sector banks for FY15 (at Rs 37,361 crore) could be more than that of the 24 PSBs (at Rs 34,641 crore), probably for the first time in the country’s banking history.

The minister could also take up the PSBs’ performance on current account and savings account (Casa) deposits, total advances, percentage of electronic transactions, return on assets, profit after tax, profit per employee (employee productivity), lending to minority communities and investor relationship as well as customer service. Besides, their performance on the government’s Jan Dhan/Jan Suraksha Yojana initiatives, issues related to regional rural banks and filling up vacancies in PSBs will be looked into.

A study by industry body Assocham, released on May 31, had said over 1,550 projects with investments worth about Rs 26.5 lakh crore were stuck as on December 2014 across 21 major states with infrastructure sector projects accounting for around 45% of them followed by manufacturing sector projects (28%).

The projects are stalled due to lack of clearances (environment and others), land acquisition problems, unfavourable market conditions, paucity of funds, waning of promoter interest and poor supply of fuel/feedstock/raw material, it said.

According to a finance ministry report, prepared for its review meeting with PSBs in March, 299 big ticket projects with a total outlay of Rs 18.13 lakh crore were stuck. To professionalise management, the government is expected to appoint new heads for three PSBs by filling up the vacancies within this month-end. Banking experts from private banks are also being considered for these top posts. The government has split the post of chairman and managing directors at PSBs.

Besides, it will soon operationalise the Bank Board Bureau (BBB) proposed in the Union Budget FY16. Apart from selecting PSB heads, the BBB will give recommendations on mergers and acquisitions (M&As), consolidation and capital raising.

Jaitley had said that to be compliant with Basel-III norms, there was a need to infuse Rs 2.4 lakh crore into PSBs as equity by 2018. Raising additional resources was needed meet this huge capital requirement, he said.

While preserving public ownership, with government holding at least 52%, the capital will be raised by increasing the public shareholding in a phased manner via sale of shares through retail to Indian citizens, he had said. The government is currently planning to effect phased dilution of its stake in PSBs to 52%.

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