New Delhi, January 4 (IANS): Noting that it was public investment that had enabled the country to consistently achieve over 7 per cent growth at a time of dismal private investment, Finance Minister Arun Jaitley said on Thursday the government is bringing all possible resources to bear in order to resolve the issue of banks’ bad loans.
Participating in a short-duration discussion in the Rajya Sabha on the state of the economy, Jaitley said that it was reckless lending by banks during the boom years in the previous UPA government that had led to accumulation of such huge non-performing assets (NPAs), or bad loans, in the Indian banking system.
“As regards the banking system, we are trying to put all our resources into it (NPAs issue),” he said.
“Industry doesn’t pay back the banks… so this bailout that we’re doing with the taxpayers’ money is not an ideal situation.”
Referring to the Rs 2.12 lakh crore recapitalisation plan for state-run banks approved by the government in October, the Finance Minister said the objective is to ensure that the lenders’ ability to support growth is not impacted by their combined NPAs which have crossed the staggering level of Rs 7.5 lakh crore.
“Reckless lending without proper risk management has affected the banks capacity to support growth,” he said, referring to the high-growth period after 2008 when the massive lending by banks is now being reflected in their accumulated bad loans and through heavily leveraged corporate balance sheets.
“This is another reason which has contributed to the reduced private investment,” he added.