Arun Jaitley promises greater autonomy to PSU banks

Bankers’ Retreat: Stresses on the need for banks to fund infrastructure.

PSU banks, banks, NPA, RBI, Raghuram Rajan, FSR, Arun Jaitley

Finance Minister Arun Jaitley and RBI Governor Raghuram Rajan during the Bankers’ Retreat “Gyan Sangam” at NIBM, Pune. (Source: Express Photo by Arul Horizon)

Expressing concern over the level of bad loans in the banking sector, finance minister Arun Jaitley on Saturday termed the level of bad assets in the system as ‘unacceptable’.

“There are unacceptable levels of NPAs (non-performing assets) in some cases and the banks have to be given a sufficient amount of leeway … to deal with commercial issues with a commercial mindset,” Jaitley told reporters on the sidelines of a two-day bankers’ retreat in Pune.

The FM said there is a need to bring about changes in many areas in state-run banks, including giving “far greater autonomy” and allowing them to hire the best talent.

Story continues below this ad

As per the Reserve Bank of India’s (RBI’s) Financial Stability Report released recently, public sector banks (PSBs) continued to record the highest level of stressed advances at 12.9 per cent of their total advances in September 2014, followed by private sector banks at 4.4 per cent.

Capitaline data also showed that the level of NPAs in the banking system as on September 2014 stood at over Rs 2.7 lakh crore.

He added that, therefore, the government is giving a very high priority to the conclave and is listening to various experts and bankers. “I’m sure this two-day interaction is certainly going to pave way for a new roadmap,” Jaitley said.

The government, which is a majority owner in 27 public sector banks, which control over 70 per cent of the system, wants to hear the problems plaguing the sector from the bankers and external experts, as “they know the best where the shoe pinches”, said the finance minister.

Story continues below this ad

The minister also stressed on the need for banks to fund infrastructure and manufacturing sector in order to achieve higher growth.

“There is a need now for the banking system in India to finance infrastructure and manufacturing and infuse liquidity in a big way.

There is also a need to conceive several reforms in the banking sector,” he said.

Recently the RBI, in a notification, had said banks can also fund existing projects under the 5/25 scheme, paving the way for further flexibility in lending to the infrastructure sector.