The Centre is willing to give more than the ₹25,000 crore specified in the Budget for recapitalising public sector banks (PSBs), Minister of State for Finance Jayant Sinha said on Friday.
“We have a clear sense of what the stressed assets mean on the banks’ balance sheets. The Budget has allocated ₹25,000 crore for recapitalisation and we can give more, if required,” he said, adding that the Reserve Bank had also done its bit by tweaking norms and easing the capitalisation norms of banks.
“Stressed assets of scheduled commercial banks are at about ₹8 lakh crore as against the total loan book of ₹69 lakh crore. We will continue to work with those numbers to see how we can further expedite and strengthen the recovery process,” said Sinha, who was speaking at the second annual Gyan Sangam – a retreat of heads of public sector financial institutions, the Finance Ministry and the Reserve Bank of India.
“We now have a good control over non-performing and stressed assets and we will work closely with the Reserve Bank of India,” Sinha added.
Legal framework soon Financial Services Secretary Anjuly Chib Duggal said steps to strengthen the legal framework for recovery by banks are on the anvil. “They may be announced on Saturday,” she said.
In 2016-17, allocation of capital to public sector banks would be based on three aspects.
“Whether all banks are meeting their capital adequacy norms, performance of banks and dynamic discussions on their credit growth,” Sinha said. Reserve Bank Governor Raghuram Rajan also addressed the heads of public sector financial institutions.
The bankers also had a session with the Chief Vigilance Commissioner and were then divided into five working groups on restructuring and mergers and acquisitions of banks, NPA management and recovery, technology, digital and financial inclusion, credit growth and risk management.
They will prepare reports and discuss them with Finance Minister Arun Jaitley on Saturday to work out further strategies for the banking sector.
An eyewash: officers’ body However, the All India Bank Officers’ Confederation was unimpressed by the session and called it an “eyewash”. The organisation, which represents over 2.75 lakh banking officers, was not invited to the retreat.
“We are really surprised that except for lip service, no steps are being taken by the government to reduce the mounting NPAs (non-performing assets) of the banking industry, which are basically due to policy paralysis,” it said in a statement.
It suggested that bad loans be recovered by measures, including strengthening of Debt Recovery Tribunals (DRTS) and the SARFAESI Act, amending the Indian Penal Code (IPC) to make wilful default a cognizable offence, and barring promoters and full-time directors of companies that have wilfully defaulted from holding public offices.