Cabinet takes important decision to resolve rising NPA problem

In a major move by the government to tackle the rising issue of bad loans and NPAs with banks the cabinet has cleared the ordinance to resolve the issue. The cabinet on Wednesday approved the amendments to the Banking Regulation Act.

The Executive Order on the NPA policy has been sent to the President and it is expected to get the nod from him tonight.

Hinting at the decision taken by the government Finance Minister Arun Jaitley told reporters that the cabinet has taken an important decision regarding the banking sector but it would not be right for him to comment till the President's approval is not received.

The cabinet headed by Prime Minister Narendra Modi gave the approval for various issues such as the Steel Policy, approval of $4.5 billion line of credit to Bangladesh, among others.

The total non-performing assets (NPAs) of banks have mounted to Rs 614,872 crore as of February 2017. The NPAs have been the highest in the public sector banks (PSBs) and has been dragging them down.

While the Indian economy has been growing at a good pace, a recent International Monetary Fund (IMF) report cautioned the Indian government regarding the rising bad loans and its impact on the economy if it is not taken care of.

Jaitley last month said that non-performing assets (NPAs) are showing a declining trend in the last quarter of the current financial year. He said that despite this trend, NPAs continue to be a challenging task for banks.

Jaitley said, "The core problem of NPAs is with very large corporates, though few in numbers, predominantly in the steel, power, infrastructure and textile sectors. He said that they had expanded their capacity during the boom period (2003-08) but could not face the onslaught of global financial crisis and consequent slow down thereafter."