How FM Jaitley is planning to revive the crippled banking sector

Said encouraging private investment and improving lending capacity of banks are the two challenges govt faces

Addressing the problem of debt-laden banks as a core “concern” for the economy, Finance Minister Arun Jaitley on Friday pledged to find resources to ease banks off stressed assets. 

Jaitley, on the sidelines of the 70th Annual General Meeting (AGM) of Indian Bank Association (IBA), said the two major challenges that the Indian government faces are — encouraging private investment and improving the lending capacity of banks.

The finance minister stressed that bad loans have crippled the ability of lenders to offer new credit and a push must be given to revive the sector.

He said that the government had amended laws to bring a speedy resolution of the bad debts of banks, including Insolvency and Bankruptcy Code, 2016.

“India's ability to face challenges in the economy is much better, higher than what it traditionally has been," IANS reported. Further, he said that government stands with the banking system and will take “whatever steps are required to strengthen the banking system.”

Demonetisation created a new normal

Crediting the banking system for efficiently carrying out operations during demonetisation followed by the remonetisation process, he said that the banks with the constraint of time dealt with the large inflow of cash and distribution of new currency.

"There was a conscious effort being made to alter both the behaviour and spending pattern of society. A new normal was sought to being created,” Jaitley told PTI.

Jaitley said that demonetisation created a new normal wherein cash transactions have been visibly reduced and tax base has expanded.

GST smoother than expected

He said that the new mechanism of indirect taxes — goods and services tax (GST) — was going smoother than expected and more people are likely to come under the taxation net.

Jaitley said: "These are early days of implementation of the alternate taxation system. So far it is going smoother than expected. The decision-making mechanism on top has been reasonably institutionalised. The mechanism to issue day to day issues has been created and is robust,” reported IANS.

"The number of people coming to the new tax network is likely to gradually expand," he added.

GST, which brings the economy under the umbrella of a uniform tax regime, was implemented from July 1, 2017. 

India’s GDP growing at snail’s pace

India's GDP grew slower at 5.7 per cent during April-June — the lowest in three years of the Modi government while lagging China for the second straight quarter — as manufacturing slowed ahead of the GST launch and note ban impact lingered. 

Jaitley had recently attributed the lower GDP numbers to pre-GST de-stocking of goods and expressed hope that the economy will grow at 7 per cent, saying manufacturing has bottomed out.