Jaitley asks banks to take proactive steps in funding projects

Union Finance Minister Arun Jaitley on Thursday asked public sector banks to be proactive in funding various projects.

Jaitley, who met the heads of public sector banks to review the financial performance of the second quarter, emphasized on funding and supporting of government projects by the banks.

"We have suggested to the banks proactive steps in funding and supporting various projects so that credit take-off regard to those projects also picks up in a big way," said Jaitley.

Indian banks, which have been battling mounting bad loans, face not only a huge challenge of raising capital to conform to the Basel III standards but also several local rules on capital buffers and additional capital needs for systemically important banks.

The country's banking sector is sitting on roughly six trillion rupees' worth of stressed loans - or nearly 10 percent of the total advances - according to estimates from credit rating agency Fitch's local unit.

About 45 percent of the loans have already gone sour, while the remainder is in the 'restructured' category - troubled, but for now requiring banks to set aside only minimal reserves.

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Credit growth, meantime, has fallen to its lowest in more than a decade.