Union finance minister Arun Jaitley on Tuesday said non-performing assets (NPA) of public sector banks (PSB) are on the decline as recoveries have picked up, but it's a challenge to loan growth.

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Speaking to reporters after the annual review meet with top public sector bankers, Jaitley said last several years have been challenging for PSB as large amount of lending was held up in NPAs.

But the impact of Insolvency and Bankruptcy Code (IBC) led resolutions are clearly visible in today's review meeting and had a challenge of how to crack this NPA problem over past few years, he said.

Finance minister said recoveries have not just picked up because of National Company Law Tribunal (NCLT) resolutions, but also borrowers are paying up in anticipation of losing companies.

"We are passing through a phase of good growth as far as the economy is concerned. Consumption has moved up, and therefore the banking activity is bound to pick up," Jaitley said.

On the proposal to merge Bank of Baroda (BoB) with Dena Bank and Vijaya Bank, Jaitley said the merger of PSU banks will be in the interest of all employees and it will expand banking activities and further protect jobs.

According to Jaitley, the idea of merging banks is to create a strong single bank with merger and not a weaker bank.

Talking on capital support to PSBs, Jaitley said Rs 70,000 crore and Rs 3 lakh crore capital infusion plans have been announced over last few years and the government stand fully in support of the banks.

Finance minister also assured investors that the government is continuously looking at the capital issues of PSBs.

On debt-ridden infrastructure financier IL&FS, Jaitley said it's not necessary for everyone to speak out of turn and he had nothing further to add to what the LIC chairman V K Sharma has said.

PSBs are giving effect to all social welfare schemes and last several years had been challenging for all state-run banks as they financed large projects, Jaitley said.

He said state-run banks continue to enjoy a large market share and are at the forefront of financing infrastructure and industry.

After a prolonged period of pain, last quarter saw a net profit reporting, Jaitley said adding that recoveries are better and lending abilities are better now for PSBs.

Earlier, financial services secretary Rajeev Kumar said banks expect to recover Rs 1.8 lakh crore through IBC and other routes during the current fiscal.

The review meeting Tuesday discussed credit growth and asset quality, he said.

The focus should now be on arresting fresh slippages, he said adding close to Rs 18,000 crore worth of non-core assets will be sold by PSBs this financial year.

First Published:Sept 25, 2018 6:19 PM IST