Government addressing banks' bad loans issue: Modi

Noting the massive stressed assets, or bad loans, of state-run banks, Prime Minister Narendra Modi on Monday said the government would be infusing Rs.70,000 crore in the public sector banks (PSBs) in the next few years.

"Bad loans in the past few years are a problem but we can't only cry about it. We are trying to solve this problem," he said at the launch of IDFC Bank here.

"That is why, the government would be infusing Rs.70,000 crore in the public sector banks in the next few years to help them deal with the bad loans crisis," he said.

Modi said the government has initiated a series of banking reforms including re-capitalisation of PSU banks, change in rules for hiring top management and paper-less transactions to curb the black money menace.

"We have decided to bring improvements in the appointments at the top levels of the banks. This

improves efficiency," he said.

The prime minister noted that the banking sector is undergoing major transformation with the help of technology.

"The banking sector is seeing changes. Mobile banking is coming up. Banking will be premises-less and paper-less," he said.

"We have to take the country in that direction. As we use technology, we move to paper-less banking, currency-less business operations. The possibility of black money will gradually become negligible," he added.

Amid continued concerns about levels of non-performing assets (NPAs), or bad debts, 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.

As per estimates, public sector banks would need additional capital of up to Rs.240,000 crore by 2018 to meet the Basel III capital adequacy norms, put in place to guard against a repeat of the situation following the 2008 US financial crisis.