He also said the legacy issue in tax system will be sorted and government would maintain arms length in functioning of banks but will not divest completely from public sector banks because reaching banking to rural population is still an issue.
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Trying to reassure investors amid biggest weekly drop in Sensex in over six years, FM Arun Jaitley said on Friday that investors must keep faith in the “inherent strength” of Indian economy rather than getting swayed by the global headwinds. The major sell-off in the global markets created a chain reaction across the world.
He further clarified that the government is formulating policies and is conscious of the areas of support which are required to be given to the economy. However, the stock market meltdown and rising bad loans of PSU banks have possibly prompted Jaitley to speak out to stem panic reactions.
“There are a series of banking reforms which I am likely to announce in the days to come… you may find something on that”, Jaitley said at a forum here during the government’s Make In India Week event here.
“The bankruptcy law is under consideration that is active. I think it is a problem which will soon come under control”, said Jaitley, who will present his second full budget on 29 February.
“The media reports on bad position of public sector banks are not fully correct”.
Regarding the government’s commitment not to interfere in the running of banks, Jaitley said: “We have erred in the past on this”. This support is also required for further growth.
Jaitley, while observing that there is a problem of NPAs, “these are the loans, which have earlier in point of time given by these banks and as a part of prudent policy it has been considered the balance sheets should be transparent”.
He said Reserve Bank through various policies have empowered banks to recover NPAs.
As of September, gross NPAs of PSBs have increased to Rs3,01,000 crore as against Rs2,67,000 crore in March. “In any case the volume and extent of the problem should not be exaggerated so as to lead to any panic”, he said.
By using the jargon of medical for impressing the necessity for such a review, Rajan also added that a “deep surgery” is needed for cleaning up and also to recognize the NPA is same as “anesthetic” that is wanted for the process.
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The bank also refinanced seven accounts worth Rs7,743 crore under the 5/25 scheme and has a pipeline of Rs4,000 crore more.
