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2-min read

Jaitley Meets Heads of PSU Banks, Asks to Take Effective Action Against Loan Frauds

Banks must strive to be seen always as institutions of clean and prudent lending, he said.

PTI

Updated:September 25, 2018, 6:33 PM IST
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Jaitley Meets Heads of PSU Banks, Asks to Take Effective Action Against Loan Frauds
File photo of Union Minister Arun Jaitley. (PTI Photo)
New Delhi: Finance Minister Arun Jaitley Tuesday asked public sector banks (PSBs) to take "effective action" in cases of fraud and wilful loan defaults, as he exuded confidence of achieving sustained economic growth rate of 8 per cent.

The growing economy will also help banks grow in strength, he said at the annual review meeting of PSBs here.

Conversely, as the lifeline of the economy, banks would need to build their strength to support the lending needs of a growing economy, he added, according to an official release.

"At the same time", he exhorted the banks "to ensure all steps at their end to ensure clean lending and effective action in cases of fraud and wilful default, to justify the trust reposed in banks. Banks must strive to be seen always as institutions of clean and prudent lending".

The meeting is taking place in the backdrop of the 'Alternative Mechanism' (AM) deciding to merge three public sector banks - Bank of Baroda, Vijaya Bank and Dena Bank - with a view to create a global-size lender which would be stronger and sustainable.

Banks have stepped up efforts as far as recovery of bad loans is concerned.

Lenders have made recovery of Rs 36,551 crore in the first quarter of the current fiscal. This is 49 per cent higher than the same quarter of the last fiscal. During 2017-18, banks recovered Rs 74,562 crore.

Jaitley said the formalisation of the economy through the Insolvency and Bankruptcy Code (IBC), GST, demonetisation and digital payments have enabled better assessment of financial capacity and risks, and coupled with inclusive growth through massive financial inclusion, has unlocked purchasing power which will drive India's growth.

The finance minister said that "this should help India sustain a growth rate of around 8 per cent".

The GDP growth has been estimated at 8.2 per cent in the first quarter of the financial year.

While noting the positive results from the IBC mechanism, Jaitley also flagged the need to assess and revisit the efficacy of the Debts Recovery Tribunal (DRT) mechanism, particularly in view of long lead times in disposal of cases.

He underscored the requirement for expediting recovery through the DRT mechanism, so that their original objective of speedy recovery proceedings is realised, the release said.

"The Finance Minister noted that the perception regarding the health of PSBs has become more positive as banks have posted positive results in terms of resolution, recovery, provisioning and credit growth," it said.

Jaitley said that the amendment of IBC to debar wilful defaulters has had the unintended positive consequence of defaulting borrowers stepping forward to make payment in order to participate in the resolution process.

He also noted the continued relevance of PSBs in the Indian context, in view of their development contributions and to support financial inclusion. This regard, he noted that support for non-retail banking from other lenders continues to be insufficient.
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