Another Year Passed offering Bad Loans and Liquidity Crunches, Banking sector springs out hopes on the coming new budget

 
For the public sector banks, capital investment is the key to revival and that will remain their major demand from the government as it will be a major step to set the interim budget in the coming week.
New Delhi: Another year passed where we saw the banking industry grappling with several issues — right from having bad loans, delays in resolving of large cases under the insolvency and bankrupting code, liquefying crunch to the stress build up in micro, small and medium enterprise (MSME) loans management systems.Although there were some varying scales of recovery with credit demand picking up hikes and addition of bad loans coming to a halt,  coming financial year might be crucial to rejuvenate the health of the banking sector and get it back on its feet after experiencing past few years in terms of economic gains and loss.
 
For the banks that are being set in the public sector, will have to face the worse consequences in terms of handling  bad loan problems due to their more substantial decdlination the  to infrastructure and steel sectors, capital is the key to reconcile,  that remains a key demand from the government as its  set in order  to present the interim budget later this week.The central government has come up with with a new plan to infuse Rs 2.11 trillion into 20 state-run banks by the end of  March 2019, that would include banks raising some part of the capital from the markets themselves till the year-end.
 
With PSBs failing to raise the expected amount of  Rs 580 billion from the financial sector on their own, the government has  increased its capital intake  into these banks to Rs 1.06 trillion for the current fiscal. Banks are in a hope  that the next tranche of capital support for FY20 will be announced on February 1.Some lenders  are also expecting the government to announce certain steps that may help the industry tackle the bad loans menace.
 
Sunil Srivastava,  former head of  the corporate banking at State Bank of India, mentioned, “Trade Receivables Discounting System (TRS) should be made compulsory for registration process  and be  accepted by all corporates including the PSUs under the  Ministry of Corporate Affairs and should  also include  various legal authorities of the government (NHAI, Discoms etc.) to ensure continued flow  of working capital cycles, the absence of which is one of the critical  reasons for the sickness and NPAs running throughout  the country.”TDS is an online mechanism which is meant for facilitating the financing of trade receivables of MSMEs through multiple financiers working in the banking industry.
 
Banks had earlier represented to the union finance ministry on various key issues that they wanted the government to mention in the interim budget.From the government’s point of view creating a push for lending to the infrastructure sector, banks have also sought provision to raise tax-free bonds to lend to this sector, said another banking official on the condition of anonymity.
 
Under the “Union budget 2019” the government will have to do a smart and delicate balancing between prudence and aspirations. A balance has to be created both concerning capital allocation and giving tax parity for bank products and providing them other alternatives as well. It's time to recollect and consolidate gains on inflation by realigning incentives for financial intermediation with the welfare of common man being the guiding principle. The benefit of lower inflation is not getting transferred  due to the high cost of deposits. Some steps taken in this direction will truely benifit the economy,  said Rajkiran Rai, who's the managing director, and chief executive officer of  Union Bank of India. Keeping the fingers crossed and hoping for the best to happen with respect to  2019 budget.