With the Goods and Services Tax now “fairly doable”, Finance Minister Arun Jaitley said the banking sector will be the next focus area for his team. The Centre and the Reserve Bank of India will soon announce measures to resolve bad loans, he said.

The high non-performing assets (NPAs) in the banking sector is largely because of 20 to 30 accounts, Jaitley said at a ‘Breakfast with BusinessLine ’ programme co-hosted by ITC Maurya here on Sunday. “We have in principle agreed to some issues with the RBI which we will be announcing in a shortwhile. Some tough measures will be required by the banks,” he said at the interactive session moderated by BusinessLine Editor Raghavan Srinivasan.

Pointing out that “just because the rich guys haven’t paid back”, the government has had to use money that could have been spent on irrigation, poverty alleviation and job guarantee scheme MGNREGA , and given it to banks instead.

“You can’t have a situation where a very large part of India doesn’t get financial supportfrom banks to industrialise merely because 20-30 accounts are holding up most of the money…you expect the government to withdraw the money from the social sector and start supporting the banks…,” he said.

Gross NPAs of public sector banks (PSBs) rose to ₹6.06 lakh crore by December 2016 as compared to ₹5.02 lakh crore at the end of March last year. The Finance Ministry and RBI have held meetings with bankers to finalise further measures to resolve bad loans.

The Budget has provided ₹10,000 crore for recapitalisation of PSBs this fiscal.

Jaitley said the government has already taken a number of steps to ensure faster resolution of bad loans including the Insolvency Code, amendments to the DRT and Sarfaesi Acts and more foreign investment in asset reconstruction companies.

Aiding decision-making “The banks have to have the decision-making ability to settle those accounts. People must behave; they must engage partners: sell out or exit,” he stressed, adding that it is “not an impossible exercise” for the economy.

Amendments to the Prevention of Corruption Act once passed, will also help bankers and civil servants in decision making departments like disinvestment and defence purchase.

“In a liberalisation regime, you can’t have a 1989 legislation where commercial decisions honestly taken for commercial considerations and in larger public interest — even if it involves a haircut — gets interpreted to be a corrupt decision,” he said.

No privatisation The Minister ruled out privatisation of State-run lenders as “the Indian political system is still not ready”. Even the proposed stake sale in IDBI Bank is a “very complicated exercise” and not easy to achieve, he said.

However, the government would work on amalgamation of PSBs after strengthening them.

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