PSU banks expects recovery of Rs 1.80 lakh cr bad loans in FY'19: Finmin

Asserting that legacy issues are getting over, Finance Minister Arun Jaitley said Tuesday bad loans in the banking system are on the decline and recoveries of NPAs have picked up.

Banks recovered Rs 36,551 crore in the first quarter of 2018-19 and are expected to retrieve Rs 1.8 lakh crore in the whole year through the Insolvency and Bankruptcy Code and other means, a top finance ministry official said. During 2017-18, banks recovered Rs 74,562 crore.

Speaking to reporters after the annual review meet with the chiefs of public sector banks, the finance minister noted that bad debts or NPAs in the banking system were on a decline.

Last several years had been challenging for public sector banks as a large amount of lending was held up in NPAs, he said.

But after the Insolvency and Bankruptcy Code (IBC) came into force, which calls for an auction of assets of loan defaulting entities, recoveries have picked up, he observed.

Recoveries are better, the lending ability of banks is much better and to top it all credit growth has significantly moved upwards, he said.

"Recoveries have picked up...it has not picked up not just because resolutions have taken place in the NCLT, they have also picked up because those debtors who fear that they are likely to cross the deadline are paying in anticipation of an IBC process being compelled on them.

"This has brought in some light at the end of the tunnel where recoveries are better, the lending ability of banks are much better...we have overcome what was traditionally described as the legacy issues and the faster we get out of them better it is for the Indian economy is concerned," he said.

Observing that Indian economy was passing through a phase of a good growth, he said banking activity was bound to pick up with encouraging consumption and growth figures.

"Obviously, the bankers also have a certain expectation, which I have told them we will certainly consider. Some of them did mention that the PCA (prompt corrective action) guidelines should be revisited because that is indirectly impacting their lending ability and that government should be more upfront in the capital requirement of some of these banks.

"I have assured them that we will immediately look at this subject because we are as keen as them, as every Indian is, that this opportunity is not missed because we want the cycle of high consumption, high growth, NPA recoveries, credit offtake really to be utilised to the fullest in order to help economy," he said.

Noting that banks' performance was on track during the first quarter, Jaitley said they have started making a net profit.

On the proposed three-way merger Bank of Baroda, Vijaya Bank and Dena Bank, Jaitley said this will help banking activity and create the country's third-largest lender.

He assured that there will not be any job loss and every job will be protected.

With stronger financials, the new entity would be better positioned to protect jobs of its employees, he stressed.

Meanwhile, Financial Services Secretary Rajiv Kumar said banks in the meeting decided that they would mobilise over Rs 18,500 crore through monetisation of their non-core assets in the current financial year for strengthening their capital base