Finance Minister Arun Jaitley Tuesday said bad debts or NPAs in the banking system are on the decline as recoveries of unpaid loans have picked up.
Speaking to reporters after the annual review meet with top PSU bankers, he said last several years had been challenging for public sector banks as a large amount of lending was held up in NPAs.
But after the Insolvency and Bankruptcy Code (IBC) came into force, which calls for an auction of assets of loan defaulting entities, recoveries have picked up.
Recoveries are better, the lending ability of banks is much better and to top it all credit growth has significantly moved upwards, he said.
"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," he said.
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.
