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Govt will help strengthen the banking system, says Jaitley

By:  GK Gupta , Place:  Mumbai ,  Update:23 Sep 2017
 

Flagging increasing stressed assets as a core area of concern, Finance Minister Arun Jaitley on Friday said the government will expeditiously work with the banking system to strengthen it.

Flagging increasing stressed assets as a core area of concern, Finance Minister Arun Jaitley on Friday said the government will expeditiously work with the banking system to strengthen it.

Speaking at the Indian Banks’ Association’s 70th Annual General Meeting, the minister assured top bankers that when it comes to finding resources to support the banking system, which provides a lifeline to the Indian economy, the government will always be there with them.

This statement comes in the context of public sector banks needing capital to provide for the rising bad loans as well as to comply with Basel-III norms, which are aimed at improving the banking sector’s ability to absorb shocks arising from financial and economic stress.

“With regard to the increasing stressed assets, I think it is this which is really the core area of concern today…During the boom period in the global economy, people wanted to expand and therefore for some reasons based on the assessment at that time a large number of projects were taken up.

“Some sectors have been adversely affected. We have tried to address some of those sectors. There is a process of global revival on as far as the economy is concerned and some of the sectors have been reviving,” said Jaitley.

Twin challenges

According to the minister, there are two major challenges facing the economy — encouraging private sector investment and improving the capacity of the banking system to support growth.

“And now as a dynamic and progressive society we have to look for the best possible solutions and make sure that we are able to resolve these issues much faster.

“….We have changed various laws in order to support you (banks) — whether it is Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act),…whether it is DRT (Debt Recovery Tribunal,” Jaitley said.

Also underscoring that Insolvency and Bankruptcy Code (IBC) is being resorted to by banks in full swing, the minister expects ‘some early harvest’ (by way of recoveries) due to the enabling recovery laws.

Requesting more capital support to public sector banks from the government, IBA Chairman Rajeev Rishi said the banking industry is currently going through a tough phase due to stressed assets in the system and the room to lend more is stifled due to higher provisioning.

“.…Along with increased provisioning for stressed assets, banks are required to provide for cases registered under NCLT (National Company Law Tribunal), etc. Though the government has provided capital to state-owned banks, more capital will be required for regulatory compliance and this will open up more space for them to lend,” he said.


 
 
 
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