FM Jaitley says bad loans of banks are falling and recoveries are rising due to Insolvency & Bankruptcy Code
Non-performing assets (NPAs) of the government-run banks are on a decline as the recoveries of the loans have picked up, finance minister Arun Jaitley said after chairing a review meeting of the public sector banks (PSBs) at the national capital on Tuesday.
Describing the past years as challenging for the banks, Jaitley in a press conference said that recoveries were slow as a large amount of their lending was held up in NPAs. But now "the impact of the Insolvency and Bankruptcy Code (IBC) is visible. The consequences of the Code are aiding better recovery. It's not just due to the resolutions taking place in National Company Law Tribunal (NCLT) but also because the promoters are paying up for the fear of the IBC," Jaitley said, adding the IBC section 29A had forced defaulters to pay up.
Jaitley asked the chief executives and top management of the PSBs attending the meeting to take effective action against the frauds and wilful defaults.
Expressing satisfaction over credit growth, Jaitley said that the credit has significantly moved upwards, as recoveries are better and the lending ability is much better. "We are passing through a phase of good growth. Consumption has moved up, growth is good, and therefore, banking activity is bound to pick up," he said.
"The review took note of the continued improvement in banking in terms of highest ever recovery in the last quarter, pick-up in credit growth to 13.5%, growth in MSME lending to 10.5%, the highest Provision Coverage Ratio in over five years, and higher operating profits," the government said.
The government is expecting a recovery of Rs 1.8 lakh crore this fiscal, up from Rs 74,562 crore during the previous year. "Nearly Rs 18,500 crore of non-core assets will be sold during the current fiscal year," Department of Financial Services (DFS) secretary Rajiv Kumar said during the press conference.
Jaitley also said that bankers have demanded that the Prompt Corrective Action (PCA) guidelines need to be revisited as it was impacting their lending ability. While the government will take up the PCA issue with the RBI, it will address the recapitalisation issue on its own.
As far as the capital requirement is concerned, "the government stands in full support of the banks. There is a government assurance that the banks will remain in the best of health," he said. On the IL&FS matter, Jaitley said that the government was closely monitoring the situation.
The finance minister also launched a financial inclusion index to increase the competitiveness among states so that the banking services are available at every 5 km. "We want banking touch points at every 5 km through brick and mortar branches, ATMs, banking correspondents and Post Offices," Jaitley said. The minister also launched an app called Jan Dhan Darshak to locate bank branches.
ON CLEAN LENDING
Banks should ensure clean lending and effective action in cases of fraud and wilful default, to justify the trust reposed in banks
ON INSOLVENCY CODE
The impact of the Insolvency and Bankruptcy Code was visible. Its consequences are aiding better recovery
ON NPA RECOVERY
Recovery is taking place not just because of National Company law Tribunal, but also because the promoters are paying up for the fear of the IBC
ON CONSUMPTION
Consumption has moved up, growth is good, and banking activity is bound to pick up
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 "Arun Jaitley")
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