Stress on banks to ease post resolution of sectoral issues, says Arun Jaitley

The major stress on state-run banks owing to bad loans will progressively commence easing once issues are gradually resolved in various sectors, including implementation of reforms in the power sector, Finance Minister Arun Jaitley said on Monday.

"The health of public sector banks, particularly in relation to the carry-over of past problems like the unacceptable level of NPAs (non-performing assets) and bad loans was discussed," Jaitley told reporters here after a meeting with heads of PSBs.

"The problems continue, but the banks' NPAs situation will improve," the finance minster said.

"Reforms in the power sector, once they are worked out, the stress posed by discoms (distribution companies) would give way. The highways sector has started moving," he added.

He informed media persons that the bankers had offered specific suggestions regarding the steel and aluminium sectors.

"Problems of the steel sector and steps taken by the government in this area were discussed. The secretary, department of financial services will co-ordinate steps with the department of revenue to take further steps for the banks," the minister said.

The gross NPAs of PSBs rose to 6.03 percent at June-end, as against 5.20 percent in March 2015.

"A series of steps suggested by the Reserve Bank of India (RBI) which the banks are implementing will ease the situation. Additionally, the government has been proactive in solving problems of various sectors," he added.

Jaitley has allocated Rs.7,940 crore in the budget for recapitalisation of PSBs during this financial year.

In this regard, the finance minister said the "the first tranche of money that goes to the banks has already gone".

Noting the massive stressed assets of the state-run banks, Prime Minister Narendra Modi had late last month said the government would infuse Rs.70,000 crore in the PSBs over the next few years.

Jaitley had in September said the government might consider reducing its stake in PSBs to 52 percent.