Defaulters Won't Be Allowed To Sleep Well: Finance Minister Arun Jaitley

Osaka, Japan: Amid ten state-run banks suffering losses of over Rs 15,000 crore in the March quarter, Finance Minister Arun Jaitley has promised greater capital support to lenders while warning that defaulters cannot be allowed to "sleep well", leaving all the worry to bankers.

He also rejected suggestions that huge losses being posted by public sector banks were like "skeletons tumbling out", saying non-performing assets (NPAs) were mostly due to business-related losses in certain sectors rather than frauds, and one must "distinguish between chalk and cheese".

Mr Jaitley, who was on a six-day visit to Japan to attract investments, said the losses were because of provisioning to cover for bad debt and most of the lenders including State Bank of India and Punjab National Bank had good profits at an operational level.

"Look at the balance sheets of these banks. Punjab National Bank operationally had a good profit, SBI had a good profit. It is the provisioning which makes it look like a loss," the finance minister told PTI.

Stating that non-performing assets (NPAs), or bad loans, have always been there, Mr Jaitley said, "Whether you keep it below the carpet or you bring it into the balance sheet... I think a transparent balance sheet is the best way of doing business and that's what the banks are today doing."

"I am very clear, the government will fully strengthen the banks and fully support the banks where it is needed. I have declared a figure in the Budget, but I am willing to look at a higher figure if that is necessary."

On measures being taken to empower the banks, he said the bankruptcy law is one empowerment while the Reserve Bank of India's strategic debt restructuring (SDR) mechanism is also there.

"What we are doing to several other recovery laws the Securitisation, Debt Recovery Tribunal (DRT) itself is an empowerment. Therefore you cannot indefinitely have a situation where people who owe money sleep well and bankers have to worry. I think the people who owe these monies will also have to act," Mr Jaitley said.

Asserting that all NPAs are not bank frauds, he said there may be some improper loans but there were a large volume of loans resulting from business losses or on account of sectoral losses.

"The loans were rightly given, sectors haven't done well. So to say that these are all skeletons stumbling out (is not correct). A business loss is not a skeleton. A skeleton is something which is done as a scam or a scandal and therefore we must be careful to distinguish between chalk and cheese as far as the banking NPAs are concerned," Mr Jaitley further said.

The finance minister said that once the problem climaxes and the sectoral results start turning over, the situation would change.

Citing the example of Punjab National Bank, he said the lender last year made an operational profit of Rs 12,000 crore, which is not a low level of profit, but it declared loss because of provisioning for non-performing assets.

"So it is the balance sheet provisioning which has led to that situation." These NPA loans were not given recently, Mr Jaitley added.

"These are old loans which relates to sectors which have been under stress. Those sectoral problems have been addressed significantly. In many of those sectors, the balance sheet has started changing and therefore slowly it must relate to the banks itself and reflect on their balance sheet."

Against the backdrop of mounting bad loans and record losses of public sector banks, Mr Jaitley will on Monday hold a quarterly performance review with the heads of PSU banks and financial institutions.

He would "review the overall performance of PSBs (public sector banks) during the financial year 2015-16 as well as with regard to the flow of credit to agriculture, insurance and MSE sectors among others", a Finance Ministry statement said.