Arun Jaitley to meet heads of state-run banks to review assets, loans, rate cuts

Union Finance Minister Arun Jaitley will meet the heads of state-run banks on Monday to take stock of their distressed assets, or bad loans, as well as the situation following the Reserve Bank of India's (RBI) latest lowering of interest rates in September, among other issues, said an official source.

The source told reporters in New Delhi the performance meeting of public sector banks (PSBs) would also review the state of the Indradhanush programme to revive them.

Taking the first step towards a holding company structure for state-run banks, the government in August announced the setting up of a Banks Board Bureau (BBB) to recommend appointment of directors in PSBs and advise on ways of raising funds and dealing with stressed assets.

The gross non-performing assets (NPAs) of PSBs rose to 6.03% at June-end, as against 5.20% in March 2015.

Jaitley has allocated Rs 7,940 crore in the budget for recapitalisation of PSBs during this financial year.

The Union Cabinet had in December last year allowed state-run banks to raise up to Rs 1.6 lakh crore from the capital markets by diluting the government stake in phases to 52%.

Noting the massive stressed assets of state-run banks, Prime Minister Narendra Modi had late last month said the government would infuse Rs 70,000 crore into the PSBs over the next few years.

Jaitley had said in this regard in September that the government might consider reducing its stake in PSBs to 52%.

The finance minister is also expected to review the interest rate cut by banks following reduction in the key policy rate by the RBI in September.

The RBI cut the repo rate, at which it lends to commercial banks, by 50 basis points to 6.75%.

The Finance Ministry source said the meeting would also review the steps taken by PSBs to prevent future misdemeanours like the Rs 6,100-crore Bank of Baroda black money remittance case.

Minister of State for Finance Jayant Sinha had said last month that in the light of the developments relating to Bank of Baroda, "banks were exhorted to have a system in place to prevent such incidents".