Finance Minister Arun Jaitley will on Monday hold a quarterly performance review with heads of public sector banks (PSB), said an official statement, at a time when these are severely stressed by bad loans and have incurred record losses in the last quarter.
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He was addressing a press conference after meeting with CEOs of the Public Sector Banks.
Mr Jaitley, who was on a six-day visit to Japan to attract investments, said the losses were because of provisioning to cover for bad debt and most of the banks including State Bank of India and Punjab National Bank had good profits at operational level.
He added the Indian Banks’ Association would meet later on Monday to discuss and suggest a mechanism to handle such settlements.
Jaitley said at the meeting various topics like non-performing assets (NPAs), or bad loans, position, inter-operability of financial inclusion schemes, credit flow and banks’ expansion were discussed.
As regards the rising level of bad loans of the banking sector, Jaitley said: “The government firmly believes that the NPA situation have risen on account of certain sectoral stress. we must support them fully so that their ability to support growth remains sound”. Citing the example of PNB, he said the bank a year ago made a Rs. 12,000 crore operational profit, which is not a low level of profit, but it declared loss because of NPA provisioning. “Banks must also now start supporting growth which is extremely important”, he said.
He said the PSU banks clocked operational profit in excess of Rs 1.40 lakh crore last fiscal and the cumulative losses of Rs 18,000 crore suffered by them were mainly on account of higher provisioning for bad loans.
“Another set of amendments to the debt recovery legislation and the securitisation legislation are before Parliament”.
Jaitley said the banks have put forward suggestions to tackle the stress NPAs are creating.
The government has already committed Rs 25,000 crore capital, we are willing to do more.
On merging SBI and its associate banks, Mr Jaitley said the a decision would be taken shortly and the government policy by and large supports consolidation.
These NPA loans were not given recently, Jaitley added.
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The move to establish a special panel to handle hard loan restructuring decisions has been well flagged in recent weeks, as the government and banks search for a way that would make it easier for banks to take a “haircut” on bad loans.
