With stressed assets worth Rs 8 lakh crore plaguing the banking sector, finance minister Arun Jaitley on Wednesday said the rate of increase of non-performing assets (NPAs) has slowed down in the December quarter and the government is considering setting up a “bad bank” to resolve the problem.
Speaking to lawmakers at the Parliamentary Consultative Committee, Jaitley said “the government is taking sector specific measures to deal with the problem of NPAs.”
The steel sector, which has contributed the most in the pile of bad loans of banks, is showing signs of improvement, he said.
“The rate of increase of NPAs has slowed down in the last quarter of the current financial year,” he said in a series of tweets.
On the issue of setting-up a bad bank, Jaitley said “several possible alternatives exist and the issue is being debated on public platforms.”
While chief economic advisor Arvind Subramanian had suggested setting up of a bad bank to deal with the problem of non-performing loans, Reserve Bank Deputy Governor Viral Acharya had floated the twin concept of Private Asset Management Company (PAMC) and National Asset Management Company (NAMC) for resolution of stressed assets.
Jaitley said the oversight Committee constituted to oversee the process of cases referred to it by banks is doing well.
The government is monitoring the performance of the Oversight Committee, he said, adding multiplication of such committees is under consideration.
Last week, Jaitley reviewed the NPA situation with RBI and firmed up plans to go after top defaulters.
Stalling of projects coupled with fall in commodity prices have piled up losses of many industrial units, which in turn has increased the NPAs with banks.
Gross NPAs of public sector banks rose to Rs 6.3 lakh crore as against Rs 5.5 lakh crore at the end of the June quarter.
The RBI had initiated an asset quality review at banks two years ago to cleanse the balance sheets of lenders. The deadline for AQR ends on March 31, 2017.