The Finance Ministry, in consultation with top bankers, has come up with an ambitious ‘asset quality blueprint’ to combat the crisis of accumulating non-performing assets (NPAs) impeding the growth of public sector banks.
The action plan, after extensive discussions with Union Finance Minister Arun Jaitley and RBI Governor Raghuram Rajan at the ‘Gyan Sangam’ bankers retreat in Pune, aims to effect a radical change in the mindset of the functioning of PSBs, sources said.
According to them, the government may consider selectively privatizing the 27 PSBs.
A salient feature of the three-pronged approach to battle the malaise of deteriorating asset quality includes the setting up a public sector undertaking (PSU) ‘band bank’ where all big-ticket NPAs are to be parked.
The Finance Ministry is planning to crackdown on defaulters by giving more teeth to DRT laws and tone up the long-suffering debt recovery tribunals (DRT) – a demand fervently expressed by top PSB heads during discussions here.
According to reports, a staggering sum of nearly Rs. 1.5 trillion in debts is locked on account of tardy loan recovery, a fact not aided by the slow and cumbersome disposal mechanism of DRTs.
“Evolving a mechanism for time-bound disposal of bad loans was a top priority on the agenda. The Ministry is also mooting the setting-up of a central repository to deal with credit demands of small and medium enterprises SMEs,” said a top PSB head, speaking to The Hindu .
Sources said the RBI would be framing guidelines to cap pledging of shares by promoters of defaulting companies. In its latest Financial Stability Report (FSR), the RBI had expressed grave concern over promoters’ share pledging.
Further, the financial inclusion plan would now focus on asset-based strategies rather than
deposit-oriented plans. Banks have been asked to turn to multiple channels of loan recovery, namely by leveraging technology to recover stressed assets, said sources.
