Funding to shore up public sector banks has budgetary constraints: Jaitley

New Delhi, September 16

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Describing NPA situation as challenging, Finance Minister Arun Jaitley said on Friday that funding to shore up public sector banks has budgetary constraints and that lenders should take greater initiative to find buyers for stressed assets.

After reviewing performance of banks with their chief executives, he said some of the non-performing assets (NPAs) that weigh on banks' balance sheets and curb their ability to lend more, can be deprovisioned if the economy recovers.

He referred to NPA situation as neither "static" nor "permanent".

Gross NPA of the public sector banks have surged from 5.43 per cent (Rs 2.67 lakh crore) in 2014-15 to 9.32 per cent (Rs 4.76 lakh crore) in 2015-16.

"One of the challenges which the banks did mention that they are facing...to find alternative promoters or buyers.

They have been making efforts to do that," Jaitley said.

He also expressed the hope that once the situation improves banks will be able to cut rates further.

The minister further said that the Reserve Bank will take into the account the decline in retail inflation while deciding on interest rates at its policy review meeting on October 4.

With regard to higher capital infusion in public sector banks (PSBs), Jaitley said obviously "the more the merrier, but the budget has its limitation".

In a bid to shore up cash-strapped PSBs, the government last month announced infusion of Rs 22,915 crore capital in 13 lenders including State Bank of India and Indian Overseas Bank to revive loan growth that has hit a two-decade low.

This is the first tranche of capital infusion for the current fiscal and more funds would be provided in future depending on the performance of PSBs.

In all, Rs 70,000 crore in capital is to be invested over four years to contain risks in the banking industry.

On the question of farm debt waiver demands, he said: "Highest ever agriculture credit will be provided and Rs 9 lakh crore target that we have set for the current fiscal that we will achieve". — PTI