Web Exclusive
Will stand-in FM Piyush Goyal's strong focus on the banking sector pay off?

Piyush Goyal
In just over two months since Piyush Goyal was “temporarily assigned” the portfolio of finance minister, the banking sector has occupied most of his working space. Goyal’s most ambitious intervention as the minister for finance and corporate affairs too has been the announcement of Project Sashakt, an inter-creditor arrangement among banks to handle NPA cases before those loans take the road to bankruptcy courts. 

In contrast, Minister Arun Jaitley has commented on a whale of topics through blog posts since May 14, when the Presidential Communique was issued; but he has mostly avoided banks (See: Arun Jaitley: Resting, but still in the thick of things

Business Standard has analysed their respective accents, largely through the public pronouncements made by them in this period. While Goyal has held the charge of both, the ministry of corporate affairs and that of finance, he has mostly given a wide berth to revenue matters, economic affairs and expenditure. While he has commented on developments in these departments, he has not aired any plans unlike, say, in the disinvestment of Air India. “We will try to make Air India more profitable on its own; then it will become more attractive for divestment,” he said after the bids for the national carrier’s sale attracted no response. Finance ministers need to comment on a large range of economic issues and while some are significant (rupee touching life time low on June 28 in the forex market), they are different from laying out policy actions by the new minister in charge at the finance ministry.

Within days of taking over at the North Block, Piyush Goyal met the chiefs of the eleven state-owned banks that had been put under the RBI’s equivalent of ICU, the Prompt Corrective Action framework, which severely curtails their lending powers. Goyal termed their problem as “legacy issues” and promised they would soon come out of it. 

He promptly showed in which direction he wanted the banks to move and after another meeting with the chiefs of some of these banks, appointed a panel headed by Sunil Mehta, non-executive chairman, Punjab National Bank in early June, to give recommendations in two weeks on forming asset reconstruction companies or asset management companies to resolve the problem. Both, the appointment of the Mehta panel and the successive rounds of meetings with the other chiefs of state-owned banks have been a departure of sorts for the finance ministry in its handling of banks, this year. 

Ever since the Nirav Modi scam hit PNB in February this year, the department of financial services under the finance ministry has hardened its stance. It has apprised the PMO of the punitive steps taken and planned. While the investigative agencies, including both CBI and the Enforcement Directorate, have booked several top-level officers at banks, pinning responsibility for several loans gone sour, Prime Minister Narendra Modi came out publicly on it, warning that the government would not tolerate irregularities in the sensitive sector. At another level, the ministry and the Central Vigilance Commission have traded charges with the Reserve Bank of India on whether there had been adequate warnings to the banks that they were slipping up. After Goyal arrived at North Block, the temperature seems to have dropped. Officials at the department of financial services acknowledge that he has been quite hands-on. Meetings with him have been the norm from the very first day. The department has also expanded in size, with a third additional secretary-level officer joining in July. Goyal has a penchant for long working hours, often arriving in North Block in the evenings, after he has done with the railway and coal ministries. The officers have learnt to acclimatise themselves with this. 

While he said the government is open to discussing the issue of autonomy and the RBI's 'lack of powers' in regulating state-run banks, the emphasis has clearly shifted. The minister met the banks again in early July, to lay out the contours of his pet scheme, Project Sashakt. It classifies the NPAs of banks into three categories of up to Rs 500 million, above Rs 500 million and up to Rs 5 billion, and above Rs 5 billion, and then sets varying resolution methods for them. There is a clear risk, however, that this could cut the efficiency of the bankruptcy procedures India has belatedly recognised. 

From all accounts, the new minister has largely refrained from interfering in the working of the revenue department. His public pronouncements on tax have largely been on expectations from GST, including buoyant collections. He recently said the next meeting of GST Council could further rationalise some of the rates, but as expected, scotched any thoughts of a single tax rate, echoing the Prime Minister's thoughts. But other than signing on an extension of the term of the task force on direct tax by three months, to August, and raising the threshold monetary limits for appeals in tax cases, the minister has not made the department part of his daily round up.

Again, using his public statements, the department of economic affairs has also so far remained out of the glare. When Parliament convenes July 18 onwards for the monsoon session, the minister will naturally not have the option to exercise this reticence. There are at least two bills pending in Parliament that will have to be passed this session. The first is the Fugitive Economic Offenders Bill, 2018 that has already got the cabinet approval for being steered through the two houses. It lays down measures to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. The other is the replacement of an ordinance on IBC that allows categories like home owners to be also treated as financial creditors. The more controversial ones like The Financial Resolution and Deposit Insurance Bill, 2017 with its provision of bail in of the deposits held by the banks will have to wait.

Economic affairs: 

  • India to look forward for investments in 9 more projects from Asian Infrastructure Investment Bank
  • It had an opening meeting with the President of AIIB, who was satisfied with India's enthusiasm, saying the country put up very good proposals before AIIB. 
  • The infrastructure push by the government will help the economy prepare for double-digit growth. Indian manufacturing is also set to leapfrog into more modern structures—AIIB board meetings
  • Proposed a long-term infrastructure bond with a fixed coupon rate since long-term financing was a worry for the segment, especially after the transformation of IDBI and ICICI


  • GST: Dr Ambedkar stitched the nation with one Constitution, Sardar Patel bonded the fragmented nation geographically, now GST is a landmark reform that has transformed the nation into an economic union with the motto ‘ONE NATION, ONE TAX, ONE MARKET’.
  • The government has decided to hike the threshold monetary limit for tax department to file appeals in tribunals and courts to bring down litigation by 41 per cent


We will try to make Air India more profitable on its own; then it will become more attractive for divestment


  • On non-performing assets (NPAs), Goyal was optimistic about the new 'Sashakt' idea. The scheme divides stressed assets into three classes -- up to Rs 500 million; Rs 500 million to Rs 5 billion, and above Rs 5 billion -- and prescribes the resolution method—9 July
  • Government to discuss the issue of autonomy and RBI's lack of powers in regulating state-run banks—2 July
  • Independent asset management companies (AMCs) and steering committees will be set up for faster resolution of bad loans in the banking system, Finance Minister Piyush Goyal—2 July
  • One of the thoughts before the PSBs is to support MSMEs ..Banks will work as a team to arrive at a decision to support business; Goyal—20 June
  • The proposal on transferring non-performing assets (NPAs) of public sector banks (PSBs) to special purpose vehicles — asset reconstruction companies or asset management firms — is back on the agenda said Finance Minister Piyush Goyal in Mumbai—9 June
  • Newly-appointed finance minister Piyush Goyal has expressed confidence that public sector banks, particularly those placed under the prompt corrective action (PCA) by the Reserve Bank of India, would come out of the "legacy issues" quickly and promised all Central support to them—17 May
Arun Jaitley: Resting, but still in the thick of things

In the two months that minister Arun Jaitley has been out of the finance ministry, he has made his presence felt among the public through his blogs, generally posted on his Facebook site. The minister’s posts give some sense of how the division of power has operated in the finance ministry, ever since he has had to give up its active management to Piyush Goyal. 

Jaitley has often used the medium of blogs to express his views from the time he took over as finance minister in the present government. But his commentaries since his illness and consequent confinement at home have been parsed carefully for the subjects they have dwelt on.  

Of the 15 blogs Jaitley has written till date since May 14, when the President appointed Goyal as the finance and corporate affairs minister with temporary charge, there have been no commentaries on the banking and insurance sector. This does not include the brief comments Jaitley has made on the developments in the ministry. In those, he has congratulated Goyal and the finance ministry team on several issues, including banking. 

But in the blogs Jaitley has taken a different course, mostly. Counting from his first one, which was on the four-year term of the NDA government, the minister has concentrated on political themes. There are ten of those in the list, a thank-you note to outgoing chief economic advisor Arvind Subramanian, and four on straight forward economic issues, including two on tax reforms —- GST and direct tax. 

Twitter: @subhomoyb

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel