IGI Logo

Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel https://t.me/InvestmentGuruIndia 

Download Telegram App before Joining the Channel

New Delhi: Finance minister Nirmala Sitharaman will on Saturday review the effectiveness of the steps taken in recent months to make capital available to businesses and non-bank lenders, besides seeking the views of state-run bank chiefs ahead of her second Union budget.

Sitharaman’s meeting with bank chiefs assumes significance as she has already consulted industrialists, economists and state finance ministers over the last few days, seeking their views on how to reverse a deepening economic slowdown as she prepares the 1 February budget proposals.

The finance minister is expected to review credit availability to various segments of the economy, the extent to which the Reserve Bank of India’s (RBI’s) monetary stimulus has been passed on to consumers by way of lower lending rates and how efficiently banks are recovering dues and turning around sinking companies.

While the banking sector is taking bold steps to recover dues from large corporate defaulters under the insolvency and bankruptcy code, its shadow banking sector is still grappling with stress. One of the items on the agenda for Saturday’s meeting is banks’ ability to quickly auction the assets of defaulters acquired under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. This law allows banks to attach the assets of defaulters without having to go to court.

Toxic assets in banking sector have been at the epicentre of the stress in the economy.

“The finance minister will meet PSB heads tomorrow to review the performance of these banks and also take stock of all the steps taken by the government (toward the banking sector) since the announcement of the budget (in July)," a senior government official said on Friday.

Experts said while net non-performing loans for all commercial banks have decreased, it may be too early to celebrate.

“NPAs have come down. However, one should be cautiously optimistic that the worst for the sector is over. The challenges are still there are as far as the NBFC sector is concerned, it is not very clear if everything has been cleaned up. In fact, recently, fraud cases have also come up," said Kuntal Sur, partner and leader, PwC India.

According to the RBI, gross non-performing loans of banks improved 11.2% a year-ago to 9.1% on September 2019.

“In order to revive growth, the banking system has to be strengthened. The government must find out why credit disbursal is not going up toward large corporate and small businesses. The economy will not be able to grow at a faster pace if the banking and the NBFC sectors are not revived," he said, adding that the government should instil confidence among lenders so that they are able to take fair business decisions.

The finance minister is also expected to look at the issue of absorbing merchant discount rate (MDR) charges by banks.

Gireesh Chandra Prasad contributed to this story