India: Arun Jaitley to take stock of PSBs, FIs’ bad loan & credit status

  • Finance minister Arun Jaitley is expected to meet heads of public sector banks and financial institutions next week to discuss issues relating to bad loans and status of credit to micro and small enterprises.
  • A finance ministry official said the performance review meeting will also discuss execution of government initiatives such as Stand-Up India, Mudra Yojana and Prompt Corrective Action for the 11 PSB under the Reserve Bank of India’s PCA framework.
  • In May 18, RBI had imposed PCA restrictions on Allahabad Bank, including a directive to cut exposure to unrated and high-risk advances. Dena Bank was also asked to avoid taking fresh exposures the government is hopeful that as the recovery process strengthens under the Bankruptcy Code, banks will be able to recover a sizeable part of their exposure.
  • “We don’t expect other banks to slip into PCA. In fact, at least two banks should be able to improve their performance and maybe stage a comeback by the end of FY 2018,” said another government official aware of the deliberations.
  • The merger among PSBs is also likely to be discussed with the government making a case for other banks to look at options amongst themselves, he said.
  • On 17 Sep 18, the government had proposed the merger of Vijaya Bank and Dena Bank with Bank of Baroda with an aim to create the country’s third-biggest lender.
  • There could also be some discussion on RBI’s 12 Feb 18 circular and its impact on various sectors including power. The circular directs that defaulters have to be admitted to the National Company Law Tribunal (NCLT) for insolvency proceedings within 180 days, which ended on 27 Aug 18.

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