Bad loans cut down profits of Indian state banks: Finance minister Arun Jaitley

File photo of Finance Minister Arun Jaitley. Photograph:( AFP )

WION New Delhi, Delhi, India Sep 16, 2016, 01.28 PM (IST)
Indian finance minister Arun Jaitley on Friday pushed back calls to increase the allocation of funds to recapitalise many state-run banks. 

The asset quality review ordered by the Reserve Bank of India reported huge losses for the first quarter ended June 30 for many state-run banks, on account of a sharp rise in provisioning for NPAs (Non-Performing Assets) or bad loans.

"PSBs (public sector banks) have collectively made an operating profit of Rs 34,967 crore this year, but after allowing for the provisioning for bad loans, among others, net operating profit works out to Rs 222 crore," Jaitley told reporters following the review meeting with heads of state-run banks and financial institutions. 

Jaitley also pointed to the steel and infrastructure as the main sectors that provoked the asset quality review.

"The major contributors to the banks' situation have been the steel and the infrastructure sectors. However, with the imposition of the MIP (minimum import price - to check cheap imports) the big steel companies' balance sheets have started turning," the minister said.

Jaitley said the highway sector has picked up and recent measures for the construction sector will ensure quicker resolution of disputes, kick-start stalled projects and make access to financing easier.

He described the NPAs situation as being "not static or permanent".

"There has been a lot of provisioning on account of NPAs. With an uptick in the sectors, a large part of these would become de-provisioned and the accounts themselves would get upgraded," he added.

The government last month announced infusion of Rs 22,915 crore capital for 13 PSBs, as part of the first tranche of capital infusion for the current fiscal.

(WION with inputs from agencies)