The rate of rise in bank’s non-performing assets has slowed down in the March quarter and the steel sector has started showing signs of improvement, Finance Minister Arun Jaitley said Wednesday. The core problem of NPAs is with very large corporates, though few in numbers, which are predominantly in the steel, power, infrastructure and textile sectors, Jaitley said at the Parliamentary Consultative Committee meeting.
Watch What Else Is Making News
“To deal with the NPAs of the banks is a challenging task even though the NPAs have shown a declining trend in the last quarter of the current financial year,” Jaitley said.
He said some corporates have expanded their capacity during the boom period from 2003-2008, but could not face the onslaught of global financial crisis and consequent slow down thereafter.
“The government is taking sectoral specific measures to deal with the problem of NPAs specifically in the resolution of large debts… Steel Sector is on its path of recovery while many decisions have been taken in the infrastructure, power and textile Sectors to resolve their problems,” Jaitley said.
The gross NPAs of public sector banks have risen from Rs 5.02 lakh crore at the end of March 2016 to Rs 6.06 lakh crore in December 2016.
The members of Consultative Committee too gave various suggestions in order to deal with the NPAs of PSBs.
Some Parliamentarians suggested that apart from recovery proceedings, criminal action must be taken against the big wilful defaulters and their photographs may also be published, a finance ministry statement said.
“A member also suggested that under the SARFAESI Act, the focus should be on catching big wilful defaulters,” the statement added.
Jaitley said the RBI has set up an Oversight Committee to look into process of the cases referred to it by the different banks. “Seeing the response and its performance, the Government is considering multiplication of such committees”.
On the issue of setting-up a ‘bad bank’, Jaitley said that several possible alternatives exist and the issue is being debated on public platforms.
The Finance Minister further said the Insolvency and Bankruptcy Board of India (IBBI) has already been set up under the Insolvency and Bankruptcy Code, 2016.
During the meeting, members of Parliament was apprised of the various measures undertaken by the government and Reserve Bank to deal with the problem of NPAs.
During the meeting, one member suggested that state governments may be allowed to take part in the auction of stressed assets.
Some members also said that since Asset Reconstruction Companies (ARCs) are in private sector and their performance is not up to the mark in many cases, therefore, close monitoring of their operations be done through stringent regulations especially in the wake of decision to allow 100 per cent FDI in the ARCs through automatic route.
Another member suggested that to improve the confidence of bank officials, the Gross NPA norm may be fixed in the range of 9-10 per cent as well as not counting the asset as NPA if it has been restructured.
Some members suggested that the government must go ahead to establish Public Sector Asset Rehabilitation Agency (PARA) and it should only consider those NPAs where sector specific reforms do not work.
Other suggestions given by the members included that a Special Bank may be created where NPAs of all the Public Sector Banks be transferred.
Young entrepreneurs who have taken soft loans from the banks but suffered due to slow down may be supported by the banks in order to revive their businesses.
It was also suggested by some members that there is a need to restore the confidence of the officers of the banks which have been off later adversely affected due to increasing NPAs.
The MPs recommended measures be taken to comfort these officials and to enable them to take commercially viable and rational decisions.
They suggested creating a Special Performance Vehicle (SPV) Committee outside the banking system to guide commercial decisions.
The Members of the Consultative Committee who participated in the today’s meeting include Baijayanta Panda, Kailkesh Narayan Singh Deo, Udit Raj, Anil Desai, N Gokularishnan, Rajeev Chandrasekhar, Rajkumar Doot and Shri Sukendu Sekhar Roy.
Finace Secretary Ashok Lavasa, Economic Affairs Secretary Shaktikanta Das, Revenue Secretary Hasmukh Adhia, Financial Services Secretary Anjuly Chib Duggal, DIPAM Secretary Neeraj Gupta and Chief Economic Advisor Arvind Subramanian also attended the meeting.