Finance Minister Arun Jaitely on Wednesday said that non-performing assets (NPAs) are showing a declining trend in the last quarter of the current financial year. He said that despite this trend, NPAs continue to be a challenging task for banks.
Jaitley said, "The core problem of NPAs is with very large corporates, though few in numbers, predominantly in the steel, power, infrastructure and textile sectors. He said that they had expanded their capacity during the boom period (2003-08) but could not face the onslaught of global financial crisis and consequent slow down thereafter."
Talking about the steel sector, Jaitley said, "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," adding, "The Government is taking sectoral specific measures to deal with the problem of NPAs specifically in the resolution of large debts."
Jaitley also said that the Reserve Bank of India (RBI) has also made an 'Oversight Committee' to look into process of the cases referred to it by the different banks. He said that the Government is considering multiplication of such committees. On the issue of setting-up a ‘bad bank’, the Union Minister of Finance said that several possible alternatives exist and the issue is being debated on public platforms.
RBI's new deputy governor Urjit Patel has backed setting up of a bad bank to tackle the NPA issue.
One member suggested that the concerned State Governments may be allowed to take part in the auction of stressed assets.
It was also suggested by various members 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 the operations of ARCs be done through stringent regulations especially in the wake of decision to allow 100% 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% 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.
It was also suggested to explore long term debt market for financing NPAs.
One of the members said that the Chief Vigilance Officer of the Public Sector Bank be made a part of the Credit Committee of the bank and that first the Board of the bank should take a call about the decisions being taken by their officials rather than investigating agencies directly acting on the basis of their own information.
It was also suggested that apart from recovery proceedings, criminal action must be taken against the big wilful defaulters and their photographs may also be published.
A member also suggested that under the SARFAESI Act, the focus should be on catching big wilful defaulters.
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