Stressed sectors need some hand holding to brave trying times: FM

Business

Blaming the economic slowdown for the rise in non-performing assets (NPAs) of public sector lenders, finance minister P Chidambaram on Thursday said the government would work out a strategy to help stressed sectors recover.

"We will have to do some hand holding to let these sectors recover through these difficult times. As the economy recovers, the NPAs will improve," Chidambaram said after a meeting with chairmen of public sector banks.

NPAs of public sector banks have risen by 0.98 per cent in the one-year period ending September 2012 largely due to stress in sectors such as infrastructure, steel, construction, textile, food processing and telecom infrastructure, he said.

Though the Reserve Bank of India (RBI) guidelines permit restructuring of loans, the government is also finalising a capital infusion plan for banks in the next few weeks. "As per the Budget provision, Rs 15,000 crore is available in the current year. The top three banks that require capital infusion are Indian Overseas Bank, Central Bank of India and Bank of Maharashtra," Chidambaram said, adding that the department of financial services is looking into the capital allocation to banks.

The finance minister said that the banking sector needs to help spur growth, especially at a time when the RBI has not eased its monetary policy. "While the reduction in interest rates and the reduction in EMIs have indeed helped the housing sector and the automobile sector, it is not so evident in the consumer goods sector," he said, adding the banks cannot reduce interest rates further in absence of rate cut by the RBI.

"So we have to wait for the date, when interest rates come down," he said. The RBI's next policy review is slated on December 18. Significantly, the meeting was also attended by rural development minister Jairam Ramesh, who was keen to talk public sector lenders about issues such as financial inclusion and direct cash transfer of benefits under MGNREGA.

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