Allaying apprehension of bad loans in public sector banks, Finance Minister Jaitley today said NPA situation is under control as economic conditions are showing signs of improvement.
"The situation is well under control. If you closely read the Financial Stability Report some important factors come out of the FSR. The first is that the number of weak companies are declining, the second is the number of stressed companies are deleveraging quite fast," Finance Minister Arun Jaitley told a press conference.
"There are also some positive indications about their ability to pay back to the banks itself. The stability report also feels that after the Asset Quality Review excercise, the valuation of banks' share will itself increase and therefore in future it will help in capitalisation," he said.
Gross NPAs of public sector banks (PSBs) went up to 7.30 per cent as of December 2015, from 5.43 per cent as of March 2015. In absolute terms, the reading increased to Rs 3,61,731 lakh crore in December, from Rs 2,67,065 lakh crore in March.
On the financial performance of banks, Jaitley said, public sector banks have actually even in the midst of challenges have collectively have made an operational profit of Rs 1.40 lakh crore.
"It is the provisioning which lead to a negative figure and once those sectors are addressed and some of those sectors are already showing a positive indication and obviously provisioning can itself be reversed in some of the cases," he said.
Replying to questions on when customers can see easing of
curbs on cash withdrawals, Jaitley said: "That is a decision the central bank will take in consultation with everyone."
Asked about fears expressed by critics that the note ban decision will hit the economy and the GDP growth, he said, "I think one is clear, there could have been some adverse impact for a quarter or so. It doesnt appear to be as adverse as it was being predicted.
"But in the long term, you have to plan the economy in the long term, the changes in the system which are coming about will certainly mean more money in the banks, more money with the revenue and probably a much larger and cleaner GDP," he said.
To a query about whether the rising revenue collections would have any impact on taxation in the coming Budget, he said, "I think you will have to wait for that."
Asked whether the government would take a conscious decision to reduce the quantity of money in circulation in the remonetising process, the Finance Minister said: "that is a decision RBI will take and they will be certainly guided by the requirements of the market."
"But obviously one of the intentions as far as government of India is concerned is that the paper currency should shrink and a large part of businesses should be in the alternative digital or cheque mode. Considering the very large increase in digital users that have taken place we seem to be moving in the right direction," he said.
Jaitley said a large part of the Rs 15.4 lakh crore of old high denomination notes in circulation on November 8 have already been replaced and the Reserve Bank of India (RBI) has a very large amount of currency available to support any liquidity need.
"Already a large part of benefits of this historic move are visible. A lot more money has come into the banking system," he said.
While the ability of banks to support economic activity has increased, direct and indirect tax collections have gone up significantly.
Till December 19, net increase in income tax collections has been 14.4 per cent and even after accounting for large refunds, the net rise in collection is 13.6 per cent, he said.
Indirect tax collections soared 26.2 per cent between April 1 and November 30, with revenue from excise jumping 43.5 per cent, that from service tax by 25.7 per cent and customs by 5.6 per cent, he said.
Direct tax collection has jumped to Rs 5.57 lakh crore in
April 1 to December 19 period when compared with Rs 4.87 lakh crore collection in the same period a year ago. This makes up for 65 per cent of the Budget estimate.
Advance tax payment till third quarter has gone up by 14 per cent as compared to a growth of 7.3 per cent in the same period of 2015-16 fiscal. TDS has seen a jump of 15 per cent as compared to 11.43 per cent last year while self assessment tax, which last year showed a growth of 6.47 per cent, has soared to 21.14 per cent.
Income tax collection has risen to Rs 2.20 lakh crore till December 19 of the current fiscal as opposed to Rs 1.82 lakh crore in the corresponding period of previous year.
On indirect tax front, revenue has jumped 26.2 per cent till November 30 with central excise showing a surge of 43.5 per cent and customs of 5.6 per cent and service tax of 25.7 per cent.
"On the November 8, the Prime Minister asked for the country to support him notwithstanding several inconveniences being suffered by people during the remonetisation period. We are extremely grateful to the people of India who have in very large measure supported the move," Jaitley said.
The remonetisation process, he said, has substantially advanced. "The RBI has very large amounts of currency available and it will continue to support the market to the extent that the market needs that kind of liquidity."
Stating that a very large part of currency in circulation on November 8 has already been replaced, he said banknotes will "continue to be replaced to the extent that market requires that currency."
"More and more notes of Rs 500 are also being released through the banking and post offices and therefore we can see a lot of currency into recirculation which is enabling the banking system and the ATMs to further augment the supply," he said.
Counting the benefits the demonetisation drive has yielded, Finance Minister said a lot more money has come into the banking system and its impact on taxation and revenue collection is already being seen.
"The ability of the banks (to lend) has now increased," he said.
Stating that the revenue figures itself are more significant, he said, "not withstanding what the critics have predicted in all the categories till November 30, there is a significant increase in indirect taxation. In the central indirect taxes. The increase is 26.2 per cent."
"On the year to year basis, the November of 2016 all the three indirect taxes collection is much high," he said, adding state governments would not see any significant change in numbers.
He said agriculture was one area thought to have been impacted by demonetisation but winter rabi crop sowing is higher by 6.3 per cent than last year.
"Now, the Rabi crop sowing higher than last year, life insurance businesses have increased by 213 per cent, international tourism has increased, air passenger traffic has increased, petroleum consumption has increased, the flow in Mutual Funds has increased by 11 per cent," he said.
