Tackling the latest surge in non-performing assets (NPAs) of public sector banks will be high on the agenda when finance minister Arun Jaitley meets the chiefs of public sector banks (PSBs) on June 6 to review their performance.
Among other performance indicators, the discussions with bankers would revolve around overall credit growth, credit flow to farm sector as well as progress on financial inclusion initiatives such as Pradhan Mantri Mudra Yojana, Stand-Up India and insurance schemes for the masses, sources said. Issues pertaining to consolidation among public sector banks are also likely to crop up during the discussions, they added.
With gross NPAs of PSBs touching an alarming level of Rs 5.34 lakh crore at March-end 2016, owing to the Reserve Bank of India-mandated balancesheet clean-up exercise, their lending growth has slowed to 9.86% in FY16 from 12.7% in the year-ago period.
The provisioning of about Rs 1.5 lakh crore in FY16 has put pressure on the balancesheet of the PSBs, which have reported a net loss of about Rs 18,000 crore during the year. To de-stress the banks, minister of state for finance Jayant Sinha said on Tuesday that the government plans a significant size stressed asset fund to address the NPA issue. A committee will also be set up to advise the banks on resolution of NPAs by taking some haircuts.
With NPAs slowing down credit growth, the meeting with bankers would discuss ways to improve credit growth to ensure that productive sectors are not starved of funds, which is crucial to lift economic growth to 8% in FY17 from 7.6% reported in the last fiscal. This assumes importance as private sector investment is likely to pick up in the current fiscal after lying low for the last few years, analysts say.
Agriculture sector being a priority area of the Modi government to improve rural economy, special focus would be given to ensure adequate and timely flow of credit to the farmers. Against the target of Rs 8.5 lakh crore in FY16, the target for agricultural credit in FY17 is projected to be Rs 9 lakh crore.