Page 36 - The Indian EYE 091721

Business EYE SEPTEMBER 17, 2021 | The Indian Eye 36

Govt decides to pump money into bad banks

to give a boost to the economy in trouble

Investors of small finance banks have had it rough so far in FY22

as the pandemic bruised balance sheets

Our Bureau gives hope on earnings, issues
on governance could be trickier
New Delhi to handle.

n a major move on Thurs- Meanwhile, Indian banks’
day, the Union Cabinet improved performance for the
Icleared a proposal to pro- financial year ended March
vide Rs 30,600 crore govern- 2021 (FY21) is in contrast to
ment guarantee for security the stress evident from exten-
receipts issued by the National sion of Covid-19-related relief
Asset Reconstruction Company measures to borrowers, Fitch
(NARCL) as part of resolution Ratings has said.
of bad loans, finance minister The average impaired-loan
Nirmala Sitharaman said. Brief- ratio declined to 7.5 per cent
ing the media on the decision, by FYE21 from 8.5 per cent at
she said banks have recovered FYE20. This was driven part-
Rs 5.01 lakh crore of unpaid ly by deferred recognition of
loans in the last six years. Of asset-quality strains which has
this, Rs 3.1 lakh crore has been Union Finance Minister Nirmala Sitharaman addresses a press conference masked the stress. Treasury
recovered since March 2018. in New Delhi on Thursday. (ANI) gains also contributed to the re-
The minister also said in silience of income. “However,
the last six financial years, af- along with National Asset Re- jointly by consultancy firm Bon- within the overall stronger sys-
ter the Centre’s four ‘Rs’ strat- construction Company Ltd, ston Consultancy Group (BCG) tem outcome, it is notable that
egy (Recognition, Resolution, Centre is also setting up an In- and banking industry lobby private banks’ performance was
Recapitalization and Reforms) dia Debt Resolution Company group IBA. considerably better than that
was executed, banks have re- Limited. “Public sector Banks EASE agenda is aimed at of state banks,” said Duncan
covered Rs 5,01,479 crores. The (PSBs) will have 51 per cent institutionalising clean and Innes-Ker, Senior Director at
Minister said that in 2015, an as- ownership in NARCL, while smart banking. Its fourth edi- Fitch.
set quality review of banks had PSBs and public financial insti- tion – EASE 4.0 - was flagged- The challenges faced by vul-
happened which revealed a high tutions will have a maximum of off by finance minister Nirma- nerable sectors of the economy --
incidence of Non-Performing 49 per cent stake,” she said. la Sitharaman last month. The and to bank asset quality -- were
Assets (NPAs). Breaking the budgetary al- first edition — EASE 1.0 -- underscored by the more viru-
“In last six financial years, location, Sitharaman informed was launched in January 2018. lent second wave of infections
the govt’s 4Rs strategy--Rec- that 15 per cent cash payment EASE 3.0, unveiled in February in 1Q FY22. Fitch revised down
ognition, Resolution, Recap- will be made to banks for NPAs 2020, aimed at enhancing the its real GDP growth outlook for
italization and Reforms-- was based on some valuation, and ease of banking across all cus- FY22 to 10 per cent from 12.8
executed. After this bank have 85 per cent will be given as Se- tomer experiences, employing per cent following the surge.
recovered Rs 5,01,479 crore,” curity Receipts. “For Security analytics, technology, and alter- Innes-Ker said the operat-
she said. Receipts to have their value nate data. ing environment remains chal-
The Minister further re- intact, the government has to IBA has also taken up the lenging for banks with limited
called that in 2018, just two out give a backstop arrangement, reformation of the corporate opportunities for business and
of 21 public sector banks were hence the government guaran- lending system, dealing with is- revenue growth. State banks are
profitable. However, in 2021, tee of Rs. 30,600 crore cleared sues like syndicate lending & also hampered by their weak-
only two banks reported losses, by Union Cabinet,” she added. multiple financing. er capitalization, constraining
she said. “I had announced in Meanwhile, it has been re- Investors of small finance their ability to lend. Problems
Budget 2021-22 with an inten- ported that Indian Banks’ As- banks have had it rough so far in could escalate in the event that
tion to set up an asset recon- sociation (IBA) will oversee FY22 as the pandemic bruised successive Covid-19 waves and
struction company and an asset Enhanced Access and Service balance sheets and the sud- lockdowns prevent a meaning-
management company to take Excellence (EASE) reforms in den management exits in two ful economic recovery, consid-
over the existing stressed assets public sector banks along with of them raised red flags over ering that India’s full vaccina-
like loans,” she said. “door step banking” services. governance. While the recov- tion rate is still quite low, albeit
Sitharaman informed that Till now the work being done ery post the second covid wave gradually improving.

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