Govt may soon set up asset management company to de-stress banks

In a bid to de-stress the banks, the government is mulling to take over a major chunk of the non-performing assets of the lending institutions and help companies with bad debts revive.

According to an ET report, he government intends to strengthen the financial health of the banks by infusing capital along with addressing the rising concern about NPAs. This would also ‘de-risk the economy’.

It should be noted that Prime Minister Narendra Modi along with RBI governor Raghuram Rajan held a meeting with a select few groups of bankers to discuss these issues. The government also discussed ways to speed up the stalled project in order to stimulate economic growth.

"Capitalisation of state-run banks under Basel III framework is a serious issue now. This will help de-risking the overall economy and stimulate growth," an industry leader who was quoted in the report. "This will be managed by bankers and veteran professionals," he said.

It should be noted that both gross NPA and restructured loans rose to 10.9% by the end of FY15 over 10% in FY 14.