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Stressed asset in banking system core concern, says FM

Jaitley said the exuberance to expand during the boom of the global economy has stressed the banking system, resulting in some sectors being impacted adversely.

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Stressed asset in banking system core concern, says FM
Jaitley at annual meet of IBA in Mumbai
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The increasing number of stressed assets in the banking system is the core area of concern today, according to Finance Minister Arun Jaitley.

While addressing the 70th annual general meeting of the Indian Banks Association (IBA) in Mumbai, Jaitley said the exuberance to expand during the boom of the global economy has stressed the banking system, resulting in some sectors being impacted adversely.

"The Insolvency and Bankruptcy Code 2016 is now in full swing. I think we should be able to expect some early harvest with regard to the functioning of the new institutions that have been created. A global revival is on as far as the economy is concerned and some sectors have been reviving. But the reality is that there are two major challenges — one is with regard to encouraging private sector investment and the second is with regard to improving the capacity of the banking system to support growth itself," Jaitley said.

High provisioning for stressed loans is pinching banks cutting into lendable resources. Bankers have been asking to lower the steep provisions so that there are resources to lend. However, the Finance Minister only said: "government stands one with the banking system and we will expeditiously work with India's banking system to strengthen it."

GST implementation, he said, is going on smoother than expected. "You have to tune yourself with the new taxation system and I think these are early days of the implementation of the alternate taxation system. The decision-making mechanism between the Centre and the states has been reasonably institutionalised and the number of people coming within the network itself is likely to rapidly expand."

He added that demonetization has led to the compression of cash transactions, adding that digital transactions increased from Rs 70 crore to Rs 140 crore, stabilising at Rs 130 crore, and will move up again.

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