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Government package soon for stressed state-run banks: Sinha

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NEW DELHI/INDIA, 15NOV10 - Arun Jaitley, Leader of the Opposition, Rajya Sabha, Parliament of India, India, during the Fostering Public Leadership at the World Economic Forum's India Economic Summit 2010 held in New Delhi, 14-16 November 2010. Copyright (cc-by-sa) © World Economic Forum (www.weforum.org/Photo Matthew Jordaan matthew.jordaan@inl.co.za)

New Delhi: The government is working on a comprehensive package to help stressed state-run banks and improve the flow of credit for industry, Minister of state for Finance Jayant Sinha said on Wednesday.

“NPAs (non performing assets, or distressed loans) are simply a symptom of the underlying issues that need to be resolved,” Sinha said at an event here organised by the Indian Private Equity and Venture Capital Association.

“We are preparing a comprehensive package which we will bring out shortly,” he added.

n10 jayant sinha
Minister of state for Finance Jayant Sinha

The minister said the government was trying to improve corporate governance and strengthen management at state-run banks, while also overhauling annual targets for public sector lenders to increase the focus on efficiency.

Sinha said he would meet banks over the next two days in Bangalore to fine-tune their capital-raising plans.

“We are trying to understand exactly what is their capital requirement going to be in the next one to three years. We are there to support and provide them the capital,” he said.

According to the Reserve Bank of India, gross NPAs as a ratio of total loans could rise to 4.8 percent by September from 4.6 percent in March.

The government has agreed to pump in about $3 billion into the banks during the current fiscal towards their capitalization.
Finance Minister Arun Jaitley last month said his ministry is currently preparing a list of projects stalled due to lack of finance to set in motion the process of their revival and thus bring down the NPAs of banks.

“Many stalled projects have started. The secretary, department of financial services, in consultation with others, will prepare a list of projects stalled because of finance,” Jaitley had told reporters here after meeting with the heads of public and private sector banks.

NEW DELHI/INDIA, 15NOV10 - Arun Jaitley, Leader of the Opposition, Rajya Sabha, Parliament of India, India, during the Fostering Public Leadership at the World Economic Forum's India Economic Summit 2010 held in New Delhi, 14-16 November 2010.  Copyright (cc-by-sa) © World Economic Forum (www.weforum.org/Photo Matthew Jordaan matthew.jordaan@inl.co.za)

“We will deal with these stalled projects directly. We will call representatives of state governments, of the projects and the departments concerned over the next few weeks,” he said.

Gross non-performing assets, or distressed loans, of state-run banks have gone up to Rs.260,531 crore as in December 2014. In the fourth quarter of January to March 2015, NPAs had come down from 5.64 to 5.2 percent.

As per the finance ministry’s Economic Survey published before February’s union budget, stalled projects as in December-end amounted to Rs.880,000 crore.

(IANS)

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RBI Won’t Hesitate on Steps for Financial Stability, Says Governor

Das further said that in a flexible inflation targeting framework, a delicate balance needs to be maintained between inflation and growth objectives

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Reserve Bank of India. VOA

Assuring the crisis-hit NBFC sector will be monitored, Reserve Bank of India Governor Shaktikanta Das on Friday said the central bank will not hesitate to take any required measure to maintain the financial stability of the economy.

In a lecture at the Lal Bahadur Shastri National Academy of Administration, Mussoorie, on the “evolving role of central banks”, Das also said that financial stability is major factor considered in the RBI’s monetary policy.

“In the non-banking sector, the Reserve Bank has recently come out with draft guidelines for a robust liquidity framework for the NBFCs. We are also giving a fresh look at their regulatory and supervisory framework. It is our endeavour to have an optimal level of regulation and supervision so that the NBFC sector is financially resilient and robust,” he said.

“The Reserve Bank will continue to monitor the activity and performance of this sector with a focus on major entities and their inter-linkages with other sectors. The Reserve Bank will not hesitate to take any required steps to maintain financial stability,” he added.

Reserve Bank of India. Wikimedia Commons

The liquidity crisis in the non-banking financial companies (NBFC) came to light when IL&FS defaulted on a commercial paper in September.

Das further said that in a flexible inflation targeting framework, a delicate balance needs to be maintained between inflation and growth objectives.

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“Post global financial crisis, it has been recognised that price stability may not be sufficient for financial stability and therefore financial stability has emerged as another key consideration for monetary policy, though jury is still out as to whether it should be added as an explicit objective of monetary policy.

“The fact remains that though the focus of monetary policy is mainly on inflation and growth, the underlying theme has always been financial stability,” the Governor said. (IANS)