Fear forcing defaulters to pay, says Arun Jaitley; he explains why

Non-performing assets (NPAs) of the government-run banks are on a decline as the recoveries of the loans have picked up, finance minister Arun Jaitley said after chairing a review meeting of the public sector banks (PSBs) in the national capital on Tuesday.

Describing the past years as challenging for the banks, Jaitley in a press conference said that recoveries were slow as a large amount of their lending was held up in NPAs.

But now “the impact of the Insolvency and Bankruptcy Code (IBC) is visible. The consequences of the Code are aiding better recovery. It’s not just due to the resolutions taking place in National Company Law Tribunal (NCLT) but also because the promoters are paying up for the fear of the IBC,” Jaitley said, adding the IBC Section 29A had forced defaulters to pay up.

Jaitley asked the chief executives and top management of the PSBs attending the meeting to take effective action against the frauds and wilful defaults.

Expressing satisfaction over credit growth, Jaitley said that the credit has significantly moved upwards, as recoveries are better and the lending ability is much better. “We are passing through a phase of good growth. Consumption has moved up, growth is good, and therefore, banking activity is bound to pick up,” he said.

“The review took note of the continued improvement in banking in terms of highest ever recovery in the last quarter, pick-up in credit growth to 13.5%, growth in MSME lending to 10.5%, the highest Provision Coverage Ratio in over five years, and higher operating profits,” the government said.

The government is expecting a recovery of Rs 1.8 lakh crore this fiscal, up from Rs 74,562 crore during the previous year.

Source: DNA Money