Govt may set up a new committee to tackle bad loans: Sources to CNBC-TV18

The government may set up a new empowered committee to tackle the issue of bad loans, sources have told CNBC-TV18.

The new panel may override existing panels and its members may take on the role of "empowered ombudsmen" who will take "hard decisions".

The ombudsmen may also be empowered to order the conversion of unsustainable debt into equity for lenders, who may have to take a hair cut on part of the unsustainable loan exposure.

According to sources, the government may also put the idea of a 'bad bank' on hold for now as it mulls new framework to address the NPA crisis.

On Thursday,  Finance Minister Arun Jaitley had said the government will announce a policy to push for the quick settlement of the non-performing assets (NPA) at banks in a 'couple of days'.

This is in line with the government’s plan to quickly charter out a resolution mechanism to resolve and recover the mounting bad loans in the banking sector, especially public sector banks.

KC Chakrabarty, Former Deputy Governor of the Reserve Bank of India, said that replacing the existing panels would not be a good idea.

Bad loans of PSBs rose by about Rs 1 lakh crore during the April-December period of 2016-17, the bulk of which are accounted for by the infrastructure sector - power, steel, roads - and textiles.

Last week, Jaitley had said the RBI has set up an Oversight Committee to look into process of the cases referred to it by the different banks.

Gross NPAs of public sector banks increased to Rs 606,911 crore while total stressed assets (gross non-performing assets and restructured standard advances) of scheduled commercial banks were Rs 9.64 lakh crore as on December 31, 2016.

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