After a review meeting with public sector lenders on Tuesday, finance minister Arun Jaitley said that the non-performing assets (NPAs) burdening the balance sheets of PSU banks are on the decline, and recoveries in the sector are rising.

Speaking to the media in after the meeting, the secretary of financial services Rajiv Kumar said that the government is expecting recoveries to the tune of ₹1.8 lakh crore to come in this year. These will include recoveries through the IBC and outside of it as well.

Kumar added that the primary focus of the banking sector as a whole is now maximising recoveries and arresting fresh NPA creation and slippages. He also said that ₹18,000 crore of non-core assets will be sold in the current fiscal.

The rise in recovery along with improving profitability of PSU Banks, the fear of IBC pushing promoters to repay loans on time and recent efforts to empower bankers to take commercial decisions bode well for the banking space going forward, the finance minister said.

The government will also consider the request of PSU banks for a relaxation in the Prompt Corrective Action (PCA) guidelines as credit growth is being stifled. Jaitley said that the government is committed to aiding and recapitalising PSU Banks. He, however, refused to comment on whether the government is considering more PSU bank mergers after the Bank of Baroda, Vijaya Bank and Dena Bank merger proposal.

The minister also declined from commenting on the IL&FS saga, which has caused a scare among the NBFC players in the market over higher cost of funds going forward.

The finance ministry also launched the financial inclusion index, which will gauge the penetration of banking services across states, and encourage healthy competition among states.

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