PSU distress: FM to meet executives on June 6

Finance Minister Arun Jaitley will meet all the executives of the loss making public sector banks on June 6 to discuss about the stressed assets, and analyse the several different  reasons for the losses. This move of the Finance Minister will be generally welcomed by the executives as the issue requires serious discussion and result oriented action.

The broad agenda for the meeting includes rising non-performing assets, deteriorating balance sheets, consolidation and capital requirement during the current fiscal, 2016-17. The discussion will also focus on various schemes such as Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Atal Pension Yojana (APY).

In the last six months, 22 state-owned banks have  reported losses of Rs. 30,700 crores. Capital position of the public sector banks has been severely affected. Net worth has decreased by 16.4 per cent. Things have gone from bad to worse in the Indian Banking industry.

Gross NPAs of PSBs have risen from Rs 2,67,065 lakh crore in March 2015 to Rs 3,61,731 lakh crore in December 2015. The gross non-performing assets (NPAs) of the PSBs have increased from 5.43 per cent of advances as on March 2015 to 7.30 per cent as on December 31.

This sour phase of the PSBs does not look like it’s going to settle any time soon; for instance Bank of Baroda, has said that it has suspect quality loans worth Rs. 26,900 crores, of which 57 per cent could potentially turn bad this financial year. 

The government has promised PSU banks a sum of Rs. 25,000 crores in this financial year – less than their combined losses in the second half of the last fiscal year. It could be interesting to see the outcome of this meeting.