Banks to set up asset reconstruction company for faster NPA resolution: Piyush Goyal

In yet another move to fix crisis in banking sector, the government has set up a committee to give recommendations in two weeks on formation of an asset reconstruction company for quick resolution of stressed accounts. The committee will be headed by Punjab National Bank non-executive chairman Sunil Mehta.

Announcing the decision, Finance Minister Piyush Goyal on Friday said that the committee will make recommendations on setting up of an asset reconstruction or asset management company for faster resolution of stressed accounts, and most of the stressed assets have been identified that could fit into the ARC or AMC structure.

The Minister also said that banks are also contemplating oversight committees with external experts to ensure that decision making is not stalled due to fear of future investigations. He said this after meeting the heads of state-run banks. The discussions during the meeting focused on credit flow and banks devising mechanism to ensure credit flow to good borrowers should not face difficulties.

Suggestions about strengthening governance process and honest recognition of NPAs or bad loans were discussed at the meeting, the Finance Minister said.

The statement comes days after bankers briefed the parliamentary panel on the issue of mounting NPAs and banking frauds. The parliamentarian panel later asked the bankers to prepare a road map to deal with bad loans in the system. The gross NPAs of state-owned banks had crossed Rs 7.77 lakh crore at the end of December 2017.

Earlier, bankers appearing before a different parliamentary panel had said the 180-day resolution plan for NPAs under the Insolvency and Bankruptcy Code was not an adequate window. They had also suggested the emphasis should be on restructuring the stressed assets and that referring cases for resolution under the IBC should be the last option.

Goyal also rubbished the report of possible merger of four state-owned banks. He said that the government “stands solidly behind each of the 21 public sector banks”.

Earlier this week, it was reported that the government was considering merging at least four state-run banks – Bank of Baroda, IDBI Bank Ltd, Oriental Bank of Commerce and Central Bank of India – due to poor asset quality.
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