The government on Wednesday cleared a package to resolve the persistent rise in non-performing assets that are plaguing public sector banks and denting credit growth, a top government official said.
The package, which includes an ordinance to amend the Banking Regulation Act of 1949 to empower the Reserve Bank of India to take more actions to check bad loans, is learnt to have been cleared by the government during the meeting of the Union Cabinet on Wednesday.
“A package has been approved to resolve the NPAs problem. The Cabinet has recommended an ordinance which has to first go to the President Pranab Mukherjee to secure his assent,” a top government official said.
Bad loans in the Indian banking system have gone up sharply in the last one year.
According to Reserve Bank of India data, gross NPA, as a percentage of gross advances went up to 9.1% in September 2016 from 5.1% in September 2015. During the same period, stressed assets (which is gross NPA plus standard restructured advances and write-offs), moved up from 11.3% to 12.3% and some estimates suggested it had doubled since 2013.
Public sector banks share a disproportionate burden of this stress. Stressed assets in some of the public sector banks have approached or exceeded 20%.
Some estimates suggest the total stress in the Indian banking system is about ₹14 lakh crore.
The economic survey of 2016-17 has pointed out the twin balance sheet problem — that is, stressed companies on one hand and NPA-laden banks on the other and advocates that a centralised Public Sector Asset Rehabilitation Agency (PARA) be established to deal with the problem of bad loans.
Disinvestment in hotels
The Union Cabinet also kicked off the disinvestment process for hotels owned by the India Tourism Development Corporation (ITDC). The government’s stakes will be offloaded in Ashok Hotels in Bharatpur, Guwahati and Bhopal.
“The government has decided to lease or sub-lease hotels or properties jointly with the concerned states or return the properties to the States, after fair valuation. States would then have the option to upgrade and operate the hotels by involving the private sector or to utilise the properties as per their requirements,” a central government spokesperson said.
The Cabinet approved also a policy to give “preference to domestically manufactured iron and steel products” for government’s infrastructure policy.
“The policy mandates to provide preference to Domestically Manufactured Iron & Steel Products (DMI&SP), in Government Procurement. The policy is applicable on all government tenders where price bid is yet to be opened,” an official statement said.
The Centre also approved a National Steel Policy 2017 aimed at attracting ₹10 lakh crore investments in the steel sector by 2030-31.
The policy projects creating crude steel capacity of 300 million tonnes (MT), production of 255 MT and “a robust finished steel per capita consumption of 158 kg by 2030-31, as against the current consumption of 61 kg.”
The Cabinet further approved declaring Vijayawada Airport as an international airport, as per the provisions of the Andhra Pradesh Reorganisation Act, 2014. A central sector scheme, SAMPADA was approved with an allocation of ₹ 6,000 crore in a bid to decrease agro-waste and modernise processing.
