Jayant Sinha outlined steps taken to tackle bad loans in banking sector
Minister of State for Finance Jayant Sinha on Thursday said that the problem of rising bad loans in the banking system was a "toxic overhang left by the UPA government."
In a series of tweets, Mr Sinha outlined the steps taken by the government and the Reserve Bank of India to tackle the issue. The government last year announced a revival plan for state electricity boards (UDAY scheme), which owe state-run lenders a lot of money. The government has also recently announced sops for the steel industry. The power and steel sectors account for the bulk of the stressed assets in the banking system.
Mr Sinha also referred to the revamp plan for public sector banks, called the Indradhanush plan, under which the government plans to infuse Rs 70,000 crore into the state-run lenders over the next few years.
"Indrandhanush reform package is the most wide-ranging set of reforms for the public sector banks since they were nationalized in 1969," he said. "The government is fully committed to supporting the public sector banks with sufficient capital and appropriate policy measures."
The bankruptcy bill, which is awaiting Parliament's nod, will help accelerate the recovery of bad assets, Mr Sinha said.
"Once passed, the Insolvency & Bankruptcy Law, now being examined in Committee, will immeasurably strengthen creditors' rights."
The minister also alluded to the one of the most high-profile tools offered to the banking sector by RBI - strategic debt restructuring (SDR), which helps lenders swap unpaid debt for majority control in troubled companies.
"While willful defaulters are being prosecuted comprehensively; defaulting promoters are being replaced through the SDR process," he said.
His comments come at a time when a string of state-run banks have reported huge losses on account of rising bad loans. More than two dozen state-run lenders account for close to 90 per cent of the banking sector's troubled assets of nearly $100 billion, according to estimates.In sum, our approach to solving the stressed assets toxic overhang left by the UPA government, is thorough and comprehensive n/n
— Jayant Sinha (@jayantsinha) February 10, 2016
In a series of tweets, Mr Sinha outlined the steps taken by the government and the Reserve Bank of India to tackle the issue. The government last year announced a revival plan for state electricity boards (UDAY scheme), which owe state-run lenders a lot of money. The government has also recently announced sops for the steel industry. The power and steel sectors account for the bulk of the stressed assets in the banking system.
Mr Sinha also referred to the revamp plan for public sector banks, called the Indradhanush plan, under which the government plans to infuse Rs 70,000 crore into the state-run lenders over the next few years.
"Indrandhanush reform package is the most wide-ranging set of reforms for the public sector banks since they were nationalized in 1969," he said. "The government is fully committed to supporting the public sector banks with sufficient capital and appropriate policy measures."
The bankruptcy bill, which is awaiting Parliament's nod, will help accelerate the recovery of bad assets, Mr Sinha said.
"Once passed, the Insolvency & Bankruptcy Law, now being examined in Committee, will immeasurably strengthen creditors' rights."
The minister also alluded to the one of the most high-profile tools offered to the banking sector by RBI - strategic debt restructuring (SDR), which helps lenders swap unpaid debt for majority control in troubled companies.
"While willful defaulters are being prosecuted comprehensively; defaulting promoters are being replaced through the SDR process," he said.
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