A day after global rating agency Standard and Poor’s warned India of a sovereign downgrade, finance minister Pranab Mukherjee told chiefs of public sector banks that the government was taking several steps to ‘kickstart” the economy.
“The government is committed to ensure faster project clearances, attracting new investments, both domestic and foreign, fixing regulatory issues to boost investors’ confidence,” Mukherjee said while chairing a meeting with the chiefs of state-owned banks. He added that banks have started softening interest rates after the RBI reduced the repo rate — the rate at which banks borrow from the central bank — by 50 basis points.
Mukherjee said that fiscal management was high on the government’s priority list. “Regular tariff revisions and focusing of subsidies to the needy shall have to be given necessary attention. All of this I am sure will revive growth,” he said.
He told reporters later that banks have been asked not to choke credit flow even as they need to increase their focus on monitoring the level of non performing assets. Public sector banks have managed to reduce their gross non-performing asset level from the level of 3.18% in December 2011 to 3.10% in March 2012. “We have discussed the NPA issue, banks are aware of the problem... few banks have reduced it but more work needs to be done, but I have also asked them not to choke credit flow,” he said.
Mukherjee said that banks have taken up the challenge to reduce the level of bad assets and made a record recovery against prudential write off in the January-March quarter of the previous fiscal year. He also said that deposits showed a growth of 14.4% in 2011-12 compared to the previous financial year while advances registered a growth of 17.7%.