Finance Minister Arun Jaitley held a meeting with RBI governor Urjit Patel on how to resolve the bad loans situation in the country’s banking sector, the establishment of a ‘Bad bank’ seems not to have much takers, according to sources.
Jaitley had called the meeting to deliberate on options available to the sector and the government in resolving the situation, and while the RBI was not in favour of giving more time to big ticket loan defaulters, the Department of Financial Services made a presentation on strengthening tools to manage non-performing assets (NPA) and the resolution of stressed assets. Some of the options disussed in the meeting included Private Asset Management Companies (PAMC) and National Asset Management Companies (NAMC) to resolve such stressed assets.
Also discussed were the RBI’s various schemes for tackling the situation, including the Scheme for Sustainable Structuring of Stressed Assets (S4A), Corporate debt restructuring (CDR), Joint Lenders Forum (JLR) and Strategic Debt restructuring (SDR).
“A lot of options were discussed for early resolution of stressed assets. RBI made some suggestions and these will be taken forward and be given a concrete shape,” sources said. While not much has been finalised, the setting of a bad bank was not in much favour.
“We will have to weigh the pros and cons well before using tax payers money to set up a bad bank,” the source added.
As on September 30, 2016, gross NPAs of public sector banks rose to Rs 6.3 lakh crore as against Rs 5.5 lakh crore at the end of the June quarter. This works out to an increase of Rs 79,977 crore on a quarter-on-quarter basis.
The meeting was also attended by RBI Deputy Governor Viral Acharya and S S Mundra, besides Chief Economic Advisor Arvind Subramanian, Principal Economic Advisor Sanjiv Sanyal, Financial Services Secretary Anjuly Chib Duggal and Corporate Affairs Secretary Tapan Ray.
While Subramanian had earlier suggested setting up a ‘Bad bank’, it was Acharya who last month floated the twin concept of PAMC and NAMC for resolution of stressed assets.