One of the first tasks Union Minister Arun Jaitley is likely to undertake when he resumes office as finance minister is to meet heads of public sector banks. The meeting may take place early next month to review their efforts on resolving non-performing assets in the past one year.
Jaitley is expected to resume charge as finance minister this month. Piyush Goyal, who is looking after the ministry in his absence, may be retained for sometime to assist him.
The review comes in the back of state-owned lenders making impressive cash recovery from their non-performing assets in the first quarter (April-June) of the current financial year.
However, the NPAs have been mounting in the PSBs and have crossed Rs 8 lakh crore. Ahead of the meeting, the finance ministry has also issued a stern warning to the PSBs to do a vigorous scrutiny of all NPA accounts exceeding Rs 50 crore for fraud or face penal action.
Most public sector banks are working on a war footing to finalise resolution plans for large stressed accounts to meet the August 27 deadline set by the Reserve Bank of India. The RBI in a circular on February 12 had given banks time till August 27 to resolve stressed assets with outstanding dues of over Rs 2,000 crore, failing which the accounts would be referred for insolvency proceedings.
The central bank has also asked some of the big lenders the details of provisioning made to large stressed assets. The meeting will also discuss the recapitalisation requirement of banks with a top finance ministry official saying those who have performed well in the first quarter will get maximum support from the government.
The Centre had recently approved Rs 11,336 crore as capital support to five public sector banks to help them meet their regulatory capital requirements.
Moody's has already warned that the large-scale recapitalisation plan, which was meant to improve capital buffers and loan-loss reserves and also support sufficiently strong loan growth, will now be just enough to shore up capital ratios above regulatory requirements because the banks' capital shortfalls have grown larger than the government's initial projection. It said that the stress in banks will remain even after the recapitalisation.
