Finance Minister Arun Jaitley said consolidation of weaker public sector banks with stronger ones will be consider if some of the lenders continue to remain fragile despite steps to strengthen them.Though non-performing assets (NPAs) in the banking sector was a cause of concern, there was no ground to panic. The government was taking steps to strengthen the public sector banks and highlighted the measures, like capital infusion and hiring of professionals, including from private sector. Bringing down government stakes in these banks to 52 per cent would further augment their capital.The government’s first objective was to strengthen fragile public sector banks (PSBs).
After this measure, if there is a fragile bank they will look for consolidation with stronger banks. So it’s not that banks don’t get a priority. In fact, after inheriting the banks in a fragile situation, they will systematically trying to address each of these problems. On NPAs, Finance Minister Arun Jaitley said that it is (banking system) a matter of concern and not the main worry. The banking system that they inherited primarily, the public sector banks, was actually very challenging.When the economy slowed down the economy at sub-5 per cent level, it has an impact on the banking system as well. Primarily it was three or four sector.
The NPA was mainly in sectors like highways, steel, state discoms and textiles.The government has addressed the highway issue in a “big manner”, large investment is going in highways and it has “started moving”.“As far as the discoms are concerned, the Finance Minister is in touch with each of the states where the discoms need to be reformed. The government was looking at more steps to check dumping of steel in the country.
Gross NPAs of the state-run banks at the end of March quarter stood at 5.2 per cent compared with 5.63 per cent in December.Out of 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 each in the current and the next fiscal, and Rs 10,000 crore each in 2017-18 and 2018-19 fiscal year.
