Finance Ministry Arun Jaitley Thursday told public sector banks to be proactive in credit support to projects expressing the hope that their level of bad debts would reduce as the economy picks up.
"We have suggested to the banks proactive steps in supporting various projects, so that credit off take with regard to these projects picks up in a big way. Of course, the banks are conscious of their responsibility," Jaitley told reporters after the quarterly review meeting.
He expressed hope that the ratio of bad debts, or non performing assets (NPAs) to advances will come down with improvement in the economy.
"What proactive steps to be taken to ensure NPAs come down have been discussed," he said.
He also told the heads of public sector banks and financial institutions to appraise lending proposals without any "fear or favour".
The ratio of gross NPAs to gross advances had gone up to 5.32 percent at the end of September over 4.82 percent in the same period of the last fiscal.
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Meanwhile, the government must pump in Rs.240,000 crore over the next five years into state-run banks to ensure their health, even as stake sale remains an option, a top central bank official said Wednesday.
"With the emphasis on fiscal consolidation by the government of India, the leeway earlier available to the public sector banks to approach the government for additional capital will be limited," Reserve Bank of India Deputy Governor S.S. Mundra said at an investors' conference in Mumbai.
"Hence, one of the options for the government could be to reduce its stake in some of the public sector banks which presently ranges from 56.26 percent to 88.63 percent," he said.