FM Jaitley says NPAs at 'unacceptable' level for PSBs

Bad loans of public sector banks have reached an unacceptable level and an all-out effort has been launched to 'correct' their health, Finance Minister Arun Jaitley said on Friday.

"NPAs, which have reached to the present level are unacceptable. They reached this level partly because of indiscretion, partly because of inaction and partly because of challenges in some sectors of the economy, which were evident through the high NPA levels in these sectors," he said.

Public sector banks are saddled with huge amounts of bad debt and their gross Non Performing Assets (NPAs) stood at Rs 2.67 lakh crore at the end of last fiscal ended March 31.

This accounted for over 86 per cent of the gross NPAs for the entire banking industry at Rs 3.09 lakh crore.

Expressing confidence that banks would be able to address these challenges over the next few quarters, Jaitley said, "An all-out effort have been launched to correct the health and bring NPAs down. These include effort by the bank administration, the effort by the government to infuse more capital, the effort to get more finance by divesting (government holding), and then greater discretion and more importantly addressing the concerns of each of (stressed) sectors," Jaitley said at an event in New Delhi to mark the Indian Bank Foundation Day.

"And I don't have a doubt that over the next few quarters, banks will be able to address these challenges," Jaitley said.

As per global agency Moody's, Indian banks will continue to reel under the impact of bad loans in the current financial year, although new NPAs may decline.

RBI has predicted that gross NPAs in the banking system are likely to increase to 4.8 per cent by next month, from 4.6 per cent per cent in March.

For the public sector banks alone, the gross NPAs stood at 5.2 per cent as on March 31. The Finance Minister further said the government's plan to infuse capital into the PSU banks over the next four years will infuse lot of financial strength in these banks to deal with the bad loan problems.

Of the Rs 1.80-lakh crore capital requirement estimated by the Finance Ministry for state-run banks, the government would be providing Rs 70,000 crore-Rs 25,000 crore each in the current and the next fiscal, and Rs 10,000 crore each in 2017-18 and 2018-19.

Jaitley further said the new system to hire best talent, including from the private sector, for top posts will go a long way in improving the performance of state-run banks, which are lifeline of the economy.