'Banks' bad loans crisis to remain for next 2-3 quarters'

The public sector banks (PSBs) said on Wednesday that their major problem of non performing assets (NPAs), or bad loans, could continue for another two to three quarters.

"The issue of poor asset quality was discussed. The banks clarified that the problem may continue for two to three quarters before their situation improves," the finance ministry said in a statement following a meeting here with heads of state-run banks.

"Banks were advised to make judicious use of their capital," the statement added.

Minister of State for Finance Jayant Sinha told reporters after the meeting that the government has "taken various steps to bring down NPAs, and those measures too were discussed".

The meeting also discussed the alleged Rs.6,100-crore black money remittance case involving Bank of Baroda.

Sinha said that in light of the recent developments relating to Bank of Baroda "banks were exhorted to have system in place to prevent such incidents".

Noting the massive stressed assets of state-run banks, Prime Minister Narendra Modi had on Monday said the government would infuse Rs.70,000 crore in the public sector banks in the next few years.

Amid continued concerns about levels of non-performing assets of public sector banks, Finance Minister Arun Jaitley had said last month in Mumbai that the government may consider reducing its stake in them to 52 percent.

Taking the first step towards a holding company structure for state-run banks, the government, in August, announced the setting up of a Banks Board Bureau (BBB) that will recommend appointment of directors in PSBs and advise on ways of raising funds and dealing with stressed assets.

Jaitley has allocated Rs.7,940 crore in the budget for recapitalisation of public sector banks in this fiscal.

The union cabinet had in December allowed state-run banks to raise up to Rs.160,000 crore from the capital markets by diluting the government stake in phases to 52 percent.