Don't Want to Overstate Bad Loans Crisis: Arun Jaitley

New Delhi: Amid outrage over Vijay Mallya's massive default on loans, Finance Minister Arun Jaitley and Reserve Bank of India Governor Raghuram Rajan on Saturday cautioned against overstating the bad loans crisis in the banking system lest it hampers the entire lending operations and growth.

However, Mr Jaitley said individual misdemeanors will be "looked into differently".

Both were speaking to the media after the RBI's board meeting here attended by the Finance Minister as a post-Budget tradition in which they discussed the need to clean up the banks balance sheets.

"We don't want to create a situation where we overstate the crisis and in the process, the whole activity of lending for growth itself starts suffering because people become extraordinarily defensive. We don't want to reach that situation."

"So its that limited category where there is some kind of a prima facie misconduct or misdemeanor, which has taken place by the individual. Its those areas which will be looked into differently," Mr Jaitley said.

Echoing similar views, Mr Rajan said, "We have to be careful as we go forward" that one hand criminal actions are penalised."

"But at the same time we don't indulge in a broad fishing expedition which then becomes a reason for banks to get worried about making loans which then hamper the recovery as well as hamper the absolutely important investment in infrastructure that have to take place."

"So as a country, as a system, we have to draw that balance very carefully and we are hopeful that we can manage that," he said.

Public sector banks gross non-performing assets (NPAs) of the increased from 5.43 per cent as of March 2015 to 7.30 per cent as of December 2015.

PSU banks' gross NPAs increased from Rs 2,67,065 lakh crore in March to Rs 3,61,731 lakh crore in December.