PSU Banks Must Do Their Bit To Get Capital From Government, Jaitley Says

The government is mulling adding provisions to Memorandums of Understanding (MoUs) signed with public sector banks before they infuse further capital, Union Finance Minister Arun Jaitley said while speaking to reporters at an event on Friday. Jaitley was discussing the amendments to the Banking Regulations Act which gave sweeping powers to the Reserve Bank of India (RBI) to direct banks on how to manage their asset quality.

According to Jaitley, the additional provisions will have to do with the immediate cash release measures like shutting down of unprofitable branches, selling assets, reducing overheads and business improvement measures like improving credit appraisal process under active management of non-performing assets. The finance minister expects that after the amendments, RBI will be better placed to take benefits of the stress resolution mechanism.

Reserve Bank has been given powers to identify specific loans gone bad and enforce quicker resolution with the government amending the banking law through an executive order.

President Pranab Mukherjee last night signed the ordinance to amend the Banking Regulation Act, giving RBI powers to direct banks to initiate insolvency and bankruptcy in case of default, he told reporters here.

The finance minister told reporters that a list of some stressed assets is already with the RBI and it is looking into it.