PSU Banks Surge As Finance Minister Promises Speedy Resolution Of Bad Loans
State-run banks extend gains as Jaitley says government working with RBI on bad loan resolution.
The Nifty PSU Bank index was the best performing index on the National Stock Exchange after Finance Minister Arun Jaitley promised a solution to the problem of spiralling bad loans in the Indian banking system over the next few days. The government is working with the Reserve Bank of India (RBI) to arrive at a resolution, Jaitley said.
The total bad loans at India’s state-run banks stood at Rs 6.07 lakh crore as of December 31, 2016 , Minister of State for Finance Santosh Gangwar said in a parliament reply recently.
The Nifty PSU Bank index rallied as much as 4.4 percent on Friday, the biggest intra-day gain since November 10, 2016. Shares of Oriental Bank of Commerce jumped 7.4 percent, Bank of India rose 6.2 percent, Syndicate Bank surged 4.88 percent while Bank of Baroda and Punjab National Bank gained 4.5 percent each.
“The problem of big NPAs (non-performing assets) is confined to at best 50 companies and therefore those 40-50 accounts need to be resolved. Now, in way of that resolution, several issues come up: You have to find a buyer, strategic partner to find a solution. And if people are slow at doing so, thinking that the system is somewhat hopeless, the system will have to bring in some other instruments,” Jaitley said at an event organised by business news channel CNBC-TV18 on Thursday.
The finance minister, however, didn’t reveal details on the possible measures the government could undertake.
The Economic Survey 2016-2017 had suggested the idea of a centralised Public Sector Asset Rehabilitation Agency (PARA), popularly known as a ‘bad bank’. A bad bank is essentially a government-driven asset reconstruction company where banks can park their stressed assets.
