IBA panel to look at all loans, government tells PSBs

NEW DELHI: The government has asked all state-run lenders to approach the newly constituted overseeing committee to look at all their loans and not just the accounts under the scheme for sustainable structuring of stressed assets, or S4A, in a move aimed at widening the process of resolving bad loans.
The two-member committee has been set up by the Indian Banks’ Association in consultation with the Reserve Bank of India as well as vigilance and investigating agencies to provide comfort to banks to take measures to address bad loans. Its members are former State Bank of India chairman Janki Ballabh and former chief vigilance commissioner Pradeep Kumar. Public sector banks have been unwilling to sell stressed assets at a deep discount, fearing they may be hauled up by the vigilance agencies later. Stressed assets in banking sector were pegged at 12% of advances at the end of June.

A finance ministry official aware of the deliberations said some banks were under the impression that only cases under the S4A scheme are to be vetted by the committee. “There were some information gaps which have been now addressed,” said the official, who did not wish to be identified.

The government is also open to the idea of some of the stressed assets in specific sectors being taken over by central public sector enterprises (CPSEs).

“We are also open to taking over of so-Dheeraj.Tiwari@timesgroup.com New Delhi: The government has asked all state-run lenders to approach the newly constituted overseeing committee to look at all their loans and not just the accounts under the scheme for sustainable structuring of stressed assets, or S4A, in a move aimed at widening the process of resolving bad loans. The two-member committee has been set up by the Indian Banks’ Association in consultation with the Reserve Bank of India as well as vigilance and investigame of the stressed assets by state-run companies, provided they have been vetted by the overseeing committee and the state-run units concerned and administrative ministries find such proposals viable,” a senior government official said on condition of anonymity.

A senior executive with a state-run bank said banks need to be supported by government if CPSEs have to take over stressed assets. “The banks jointly need to identify companies which were to be acquired and where the acquirer can be a CPSE and then come at valuations and follow a transparent mechanism,” the executive said. He said this will require wide-scale consultations with promoters, investigating agencies and the CPSEs concerned.

Finance minister Arun Jaitley had earlier this month said that both the government and RBI have taken several initiatives and legislative measures including enactment of the bankruptcy law, changes in the Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act and Debt Recovery Tribunal, and urged banks to take action. “Therefore with these effective steps, the banks will now have to take the initiative...the NPA situation is certainly not either static or permanent,” Jaitley had said. Gross nonperforming assets of public sector banks surged to Rs 4.76 lakh crore in 2015-16 from Rs 2.67 lakh crore in the previous year.