NEW DELHI: The Union Finance Ministry is planning to hold a review meeting of all Public Sector Banks (PSB) on August 2 to discuss credit growth, liquidity situation and non-performing assets (NPAs), as well as to discuss the roadmap for Rs 70,000 crore capital infusion and passing of rate cuts announced by the RBI.
“The Finance Ministry is likely to meet the head of PSBs on August 2. The review meeting will discuss credit growth with special focus on MSMEs. Another important agenda is to discuss the passing of interest rate cut to end consumers. The meeting will also discuss the NPA situation and future roadmap for capital infusion,” a senior finance ministry official told TMS.
Apart from these, the meeting will also review the overall recoveries made by banks, including from various NCLT cases, and the haircuts.The PSBs have partially recovered from the worst, following a series of frauds and mounting NPAs. However, despite government handholding, their asset quality still remains a matter of concern. According to a Moody’s report, The India Banking System Outlook, the country’s economic growth will remain weaker than in previous years at a time when lenders are recovering from legacy non-performing loans (NPL).
“Stress at NBFIs (non-banking financial institutions) is a risk to banks’ asset quality because banks have large exposures to the sector. In addition, the moderation of economic growth could lead to the creation of new NPLs in the retail and small and medium enterprises segment,” the Moody’s report said earlier this week.
In this context, capital infusion will help weaker banks. “Capital infusions from the government will help public sector banks maintain their capital ratios at current levels,” the Moody’s report said. The government has infused Rs 2.5 lakh crore into the banks since FY15 so far, and infusion of another Rs 70,000 crore this year was announced in the Budget.