Govt to assist sectors facing slowdown heat

To finalise capital infusion in PSBs

Govt to assist sectors facing slowdown heat

The government on Thursday said it will assist sectors such as infrastructure, textile and construction that are facing the stress of economic slowdown and have also been contributing largely to the banks’ rising non-performing assets (NPAs).

At the same time, the government will also work out ways to help the public sector banks, whose NPAs have increased by close to 1 per cent in the past one year ending September.

“If the economy improves and growth improves, the sectors (which are not doing well) will recover. But in the meanwhile, we will have to do some handholding and try to help these sectors recover,” Finance Minister P Chidambaram told reporters.

Ailing sectors

The sectors, which are feeling the pinch of the economic slowdown are infrastructure, construction, steel, food processing, textile and telecom infrastructure. These sectors have also felt considerable stress in getting bank credit. Credit to consumer durables and non-durables have also not been up to the mark in recent times. However, there has been a sharp uptick in credit to housing and automobile sectors.

“While the reduction in interest rates and in EMIs have indeed helped the housing sector and the automobile sector, it is not so evident in the consumer goods sector,” Chidambaram said, adding that the banks cannot reduce interest rates further in absence of rate cut by the Reserve Bank of India.

After meeting the heads of public sector banks, the finance minister also said that the government will help the PSU banks tackle the problem of their bad loans. “NPA is reflection of slowdown in the economy,” he said.

The government is also going to soon finalise capital infusion to the tune of Rs 15,000 crore in the PSU banks, the provision for which has been made in the budget for 2012-13. The top three banks that need the most of the capital are Indian Overseas Bank, Central Bank of India and Bank of Maharashtra, Chidambaram said.

“At least, most banks will require additional capital. We will budget a provision for infusing additional capital and that decision will be taken in the next few weeks,” he said.

On the new banking licences, the finance minister said he has written to the RBI to initiate the process of issuing guidelines. The minister said that the government was also working on ensuring better flow of education loans to deserving students.

He said the finance ministry will move a Cabinet note in the next seven to ten days to launch Credit Guarantee Scheme for education loans proposed in the Budget. He said the move will improve bank lending to education sector.

Despite a considerable slowdown in the Indian economy, the public sector banks are planning to go ahead with their plan to recruit over 63,000 people in the current fiscal. Of this, 20,000 recruitments will be done by the State Bank of India alone. The hiring will be done for both, officers and clerical staff.  There were 84,489 vacancies in the state-owned banks at the end of the last financial year.

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