Pricing panel to fix NPA mess is a step in the right direction: Rana Kapoor, Yes Bank

In a chat with ET Now, Rana Kapoor, Yes Bank, says something like this could have come in earlier, but it is better late than never. Edited excerpts



ET Now: The NPA issue is a huge mess in front of the government, banks and of course the consumers at large. The government believes that there is no significant move forward in resolving that mess because banks perhaps are shying away from either taking a hair cut or even taking a decision. This is why they are mulling on something called the pricing committee which will be empowered to validate, certify and decide on haircuts as well. Do you believe this is a significant move forward in resolving the NPA mess to begin with?

Rana Kapoor: I definitely believe that this is a very good measure provided it is institutionalised appropriately with executive authority, with judicial empowering and with experts who understand valuation, audit and statutory and regulatory requirements and appreciate compliance issues. So a lot will depend on the strength of such a pricing committee but it is a good idea because it will in a big way reduce the apprehension in decision making, curtail the witch hunting that very often happens and take discreet decisions. So I personally believe that this is a very good step and will go a long way in resolving somewhere the setbacks that managements have faced while making good decisions.

ET Now: The government is going to mention this Pricing Committee in its debate over the finance bill in Rajya Sabha. It is also making up its mind to mention this committee in the Supreme Court as far as the KFA loan mess is concerned. So in some way, getting a judicial nod there and executive nod here is the most ideal solution according to you. Is that how you would have wanted this committee to be empowered?

Rana Kapoor: It is a measure that gets the ball rolling because unfortunately we have a situation where decision making has come to literally a static zone and to bring in some empowerment to bring decision making back into the system and to build credibility and to build trust and confidence around the decisions. The committee as a starting point becomes very important because of media trials and overall transparency of such decision making will become very apparent and far more evident through a mechanism of this sort. Steadily this committee additionally in judgement should have the responsibility of creating a system within the bank boards so that in future there can be bank committees who can also be sufficiently empowered and be accountable to such a board. That will follow in the second round but right now the important thing is to get the ball rolling, get the decision making and problem solving capacity back in the banking sector.

ET Now: The pricing committee is perhaps going to decide on defaults of over Rs 100 crore to begin with. There are 50, 60, 70 odd cases. How is this going to impact the NPA mess? There are Rs 8 lakh crore worth of stressed assets. I do not want you to put a finger on that number but I want you to give us a sense of what kind of resolution we could see?

Rana Kapoor: As we know, not all NPAs are uncollectable. I would reckon that at least 50-60 per cent of the NPAs which are fresh NPAs and maybe some of the sticky NPAs which have been around in the system for two-three years, can be solved if we either restructure them or we do settlements in a way that promoters and bank managements come through a transparent mechanism. A lot of capital of the banks are stuck because of indecisions. So I think, in two steps, it will really help to preserve capital, bring that back into momentum and good decision making will empower and build more confidence in managements and boards of these banks which necessarily will help in getting the ball rolling as far as the economy is concerned.

ET Now: Would you have liked this measure to come a bit earlier? The NPA mess is huge. Is a 3-4 per cent in the system acceptable? Would you have liked this pricing committee to have been constituted a little earlier than it perhaps is right now?

Rana Kapoor: Ideally a step like this should be done by the board of bank and if the board has the capability and the capacity through a transparent mechanism which is supported by statutory auditors, the compliance department, the risk department and it has to be necessarily architected within the bank at least in the future. In the absence of such a holistic system, I agree that something like this could have come in earlier, but it is better late than never.