NEW DELHI: The Reserve Bank of India’s prompt corrective action (PCA), which is supposed to save weak banks from going bust, is, in fact, stifling growth, according to state-owned banks. PSU banks feel the PCA guidelines are so stringent that they affect the banks’ lending ability, Finance Minister Arun Jaitley told reporters after the annual performance review meeting of state-owned banks here on Tuesday.
Jaitley said the government was all for PSU banks’ capital requirement and that it would look into their demand to relax some of the PCA guidelines.
PSU banks are estimated to hold 90 per cent of non-performing loans, and 11 of the 21 state-run lenders are under PCA, which restricts new lending, among others.
The government has already requested RBI to review all three trigger points of the PCA framework, namely net non-performing assets, minimum capital requirement and profitability criteria. RBI can impose sanctions on banks for not meeting any of these three clauses in the PCA.
Conceding that the past few years had been challenging for public sector banks as a large amounts were held up in NPAs, Jaitley said bad loans were coming down thanks to better recoveries.
He noted that recoveries were higher as debtors had started making payments because they’re scared of the Insolvency and Bankruptcy Code.
The FM also launched a portal www.psbloansin59minutes.com, which will enable in-principle approval for MSME loans up to `1 crore within 59 minutes from SIDBI and five PSBs.
Jaitley hit out at former RBI governor Raghuram Rajan for predicting the next banking crisis would be triggered by MSME lending, saying postmortem is easier than taking action when it was required.
Won’t let IL&FS down, all options open, says LIC
Life Insurance Corporation, the largest shareholder in IL&FS, said on Tuesday that it would not let down the troubled infrastructure conglomerate. “We will ensure IL&FS does not collapse. We will not allow contagion to spread from IL&FS... All options are open (including raising stake in the company),” V K Sharma, chairman of LIC, told reporters after a meeting at the finance ministry on Tuesday | P17