Banks free to settle loans

Finance minister Arun Jaitley with financial services secretary Anjuly Chib Duggal at the press conference after a meeting of the chairman and MD/CEOs of public sector banks and financial institutions in New Delhi on Monday. (Photo: PTI)

Committing to support bad loan-ridden public sector banks, finance minister Arun Jaitley on Monday said that they would be empowered and protected in case of “commercially prudent” settlement of bad debts.

With provisioning for non-performing assets (NPAs) or bad debts leading to Rs 18,000 crore of accumulated net loss for about a dozen banks, he said that the government will not hesitate to provide capital beyond the Rs 25,000 crore budgeted for the current fiscal.

After meeting top executives of state-run banks, Mr Jaitley said the Indian Banks’ Association — a representative body of management of banking in India — would discuss and suggest a mechanism to handle settlements of bad debts.

“The IBA would be ex-amining some of the suggestions. The government would be also open for discussion to the suggest-ions that the banks furth-er put forward with reg-ard to resolving the stress that has been created.

“One of the key considerations was that in situations like these banks should be empowered and consequently should be protected so that they can bring about commercially prudent settlements,” Mr Jaitley said, after a meeting with the heads of public sector banks (PSBs).

He said the PSBs clocked operational profit in excess of Rs 1.40 lakh crore last fiscal and the cumulative losses of Rs 18,000 crore suffered by them were mainly on account of higher provisioning for bad loans.

Minister of state for finance Jayant Sinha said the review meeting discu-ssed ways to expedite and strengthen the recovery and resolution process and that the the government is considering a stressed asset fund.

IDBI Bank managing director Kishor Kharat said the meeting discussed resolution mechanism wherein decisions of the bankers can be protected.

“In today’s atmosphere any decision taken by bankers, which is actually in the interest of recovery, if that is subsequently questioned, then it becomes difficult to take a decision. Therefore, some buffer needs to be provided,” Mr Kharat said.