NPAs on decline, country overcoming legacy issues: FM

Sending across the message of turnaround in public sector banks to investors exiting Indian markets, Finance Minister Arun Jaitley on Tuesday said bad loans of state-owned lenders were on the decline and the Centre was on track to recover close to Rs 2 lakh crore of NPAs this fiscal.

Speaking to reporters after an annual review of PSBs, he virtually asked the Reserve Bank of India to ease its recent norms governing weak lenders as they were impacting banking business and had hardly helped in bringing down NPAs.

Jaitley said during the review, the lenders requested that the RBI's Prompt Corrective Action (PCA) guideline be revisited as they were impacting their lending ability. They also wanted that the government be upfront with capital infusion in the banks.

“We stand fully in support of PSBs with respect to capital support,” Jaitley said, adding the NPAs of the banks were on decline and that the country was on the track to overcome the legacy issues.

But after the Insolvency and Bankruptcy Code (IBC) came into force, which calls for an auction of assets of loan defaulting entities, recoveries have picked up.

The gross NPAs of state-owned banks stand at Rs 9 lakh crore at present. The finance minister said that the government was expecting Rs 1.8 lakh crore worth of recovery of bad loans in the current financial year and another Rs 18,000 crore through asset monetisation of the defaulters.

Though Jaitley assured all help to the lenders, the PCA framework about which the lenders were critical in their presentation to the government, has been imposed by the RBI and the government can hardly do anything other than asking the regulator to go soft on it.

RBI had earlier this year put 11 out of 21 state-owned banks on PCA, a tool to ensure that weighed down by NPAs, the banks do not go bankrupt. The PCA norms restrict the banks from lending activities, branch expansion, inducting more staff, among others. A parliamentary committee on finance has subsequently warned the central bank against such tough norms and sought relaxation.