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With no takers for stressed assets, bad loans to stay

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Revival Of Sectors Can Significantly Cut Provisioning: FM
Finance minister Arun Jaitley on Friday indicated that banks may have to deal with the pile of bad debt for a while as it was tough to find new promoters willing to take stressed companies.
But that was not the only bad news for state-run lenders, which are grappling with a record level of non-performing assets or bad loans. Jaitley told reporters that the government's fiscal position did not permit it to significantly enhance the capital it may have to provide to the public sector players, where Centre's holding needs to be maintained above 51%.
“Obviously banks would prefer more funds for recapitalisation but there are budgetary constraints,“ Jaitley said after a meeting with public sector bank chiefs.
While the government has budgeted to provide Rs 70,000 crore during a four-year period, some rating agencies have suggested that the lenders would need more funds as they grapple with stressed assets of nearly Rs 8 lakh crore. Infrastructure, steel and power sectors are seen to be under pressure due to global economic environment as well as domestic issues. While officials contested the calculations made by ratings agencies such as Fitch, Jaitley indicated that with an improvement in repayment by companies, the capital requirement would reduce.
“The NPA situation is certainly not either static or permanent, because a very large bulk of it is provisioning. Therefore, the moment that you see revival of a sector, a lot of the provisioning itself would get de-provi sioned, and the account itself would get upgraded,“ the FM said, while reassuring investors that the government stood “solidly“ behind the banks.
Times of india

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