Attributing the recent crash in stock market to global factors, Finance Minister Arun Jaitley on Friday said there was no need for “exaggerated panic” and investors should keep the economy’s inherent strength in mind while investing.
The Finance Minister said the government will continue to pursue policies to support growth amid global slowdown.
The benchmark BSE Sensex, which crashed by massive 807.7 points on Thursday on global cues, was trading up around 100 points in the pre-close session on Friday.
“… it would be a part of prudent investment reaction that the inherent strengthen of Indian economy is kept in mind by investors rather than react disproportionately to what the global developments are,” Jaitley said.
The minister said major sell-off in global markets created a chain reaction impacting the markets world over including in India.
“There could be several reasons, which are predominantly outside the country, the uncertainty in the Fed rate or what’s happening in Europe or the slowdown anticipated in China. Now, these global factors will remain and will have to be tackled globally by those economies.
“… there need not be any exaggerated panic in India for the reason that India as an economy even in the midst of global slowdown has clearly stood out to maintain a 7.5 per cent plus growth rate,” Jaitley said.
The government is formulating policies and “is conscious of the areas of support which are required to be given to the economy and fully committed to providing those support.”
Amid global slowdown, Jaitley said services and manufacturing sectors are both recovering and hopefully would improve further on account of monsoon and generate further demand.
Terming non-performing assets as a problem, Jaitley said the government is considering more steps to empower banks to recover bad loans and the problem will be contained soon.
“These are the loans which were given earlier by these banks and as a part of prudent policy it has been considered that the balance sheets should be transparent. The banks are going to take all steps possible to recover the loans from debtors,” he said.
The Finance Minister added that the Reserve Bank, though various policies, has empowered banks to recover NPAs.
By September 2015, the gross NPAs of PSBs had increased to Rs 3,00,743 crore as against Rs 2.67 lakh crore in March 2015.
Pointing to some over-reactions to reports in the section of media with regard to the state of the public sector banks, Jaitley said, “In any case the volume and extent of the problem should not be exaggerated so as to lead to any panic.”
Regarding fund requirements of banks, he said the government will provide whatever capital they need because these banks have a very important role to play in supporting the Indian economy and their support is also required for supporting further growth.
Last year, government announced a revamp plan for PSBs — Indradhanush — to infuse Rs 70,000 crore in state-owned banks over four years, while they will have to raise a further Rs 1.1 lakh crore from the markets to meet their capital requirements in line with global risk norms Basel III.
Amid mounting NPAs of public sector banks, Finance Minister Arun Jaitley on Friday said the government is considering more steps to empower banks to recover bad loans and the problem will be contained soon.
“The bankruptcy law is under active consideration. The government is also considering some further steps to empower banks to be in a position to recover these monies (non- performing assets). I think it’s a problem which will soon come under control,” he told reporters at the North Block.
Observing that there is a problem of NPAs, he said “these are the loans, which have earlier in point of time given by these banks and as a part of prudent policy it has been considered the balance sheets should be transparent. The banks are going to take all steps possible to recover the loans from debtors.”
He said Reserve Bank through various policies have empowered banks to recover NPAs.
As on September, the gross NPAs of PSBs have increased to Rs 3.01 lakh crore as against Rs 2.67 lakh crore in March.
Pointing to some over reactions to reports in the section of media with regard to the state of the public sector banks, the Finance Minister said, “in any case the volume and extent of the problem should not be exaggerated so as to lead to any panic.”
On Thursday, Reserve Bank Governor Raghuram Rajan also assured that there won’t be a repeat of the asset quality review (AQR) that has shaved off banks’ bottom-lines and the resultant battering of banking stocks and the massive erosion of investor wealth.
“We do not envisage a sequence of AQRs,” Rajan had said.
Using a medical jargon to impress the need for such a review, Rajan said a “deep surgery” is needed to clean up and the process of recognising the NPA is akin to an “anesthetic” needed for the procedure.
With regard to capital needs of state-owned banks, Jaitley said “the government is fully committed to support public sector banks by providing whatever capital requirements are there because these banks have played very important role in supporting the Indian economy and their support is also required for supporting further growth.” .
Last year, the government had announced a revamp plan ‘Indradhanush’ to infuse Rs 70,000 crore in state-owned banks over four years, while they will have to raise a further Rs 1.1 lakh crore from the markets to meet their capital requirements in line with global risk norms Basel III.
As per the blueprint, PSU banks will get Rs 25,000 crore this fiscal and also in the next fiscal. Besides, Rs 10,000 crore each would be infused in 2017-18 and 2018-19.
Of the Rs 25,000 crore earmarked for 2015-16, the government has pumped in about Rs 20,088 crore in 13 public sector banks so far.
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