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Capital infusion only temporary relief, focus should be on NPAs: AIBEA

The Centre on Tuesday unveiled a Rs 2.11 lakh crore two-year road map for strengthening NPA-hit public sector banks, including re-capitalisation bonds, budgetary support, and equity dilution

Press Trust of India  |  Chennai 

Commuters walk past a bank sign along a road in New Delhi. (Photo: Reuters)
Commuters walk past a bank sign along a road in New Delhi. (Photo: Reuters)

The employees unions has welcomed the government's decision to infuse additional in public sector but termed it as a short term relief but not as a long term cure.

The Centre on Tuesday unveiled a Rs 2.11 lakh crore two-year road map for strengthening NPA-hit public sector banks, including re-capitalisation bonds, budgetary support, and equity dilution.

Union Minister said the infusion, will be accompanied by reforms to enable the state-owned to play major role in the financial system and give a strong push to the job-creating MSME sector.

"No doubt, this is a welcome measure because the are starved of and this additional capital will help them to do more lending. But this by itself will not help the banks to come out of the mess they are in now",AIBEA, General Secretary, C H Venkatachalam said in a press release.

The association represents employees of various public and private sector banks across the country.

"All banks are facing the problem of mounting bad debts", Venkatachalam said, adding till date the gross in banks were around Rs 8 lakh crore.

"If the restructured loans are added, the total is more than Rs 15 lakh crore", he said.

Alleging that the bulk of were by corporates and wilful defaulters, he said, "because the are increasing, the banks are compelled to make huge provisions from profits and profits are depleted to prevent internal generation of capital".

"The entire profits earned by banks have gone for making provisions for bad loans. Hence, capital is eroded and capital adequacy ratio is adversely impacted", he said.

Providing additional capital is an immediate short term solution, but recovery of bad loans is the real long term solution, he said.

Venkatachalam urged to take stringent measures to recover bad loans and declare wilful default as criminal offence."We demand recovery and not write off of bad loans. We need cure and not just relief", he said.

First Published: Fri, October 27 2017. 18:23 IST
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