The finance ministry has set up a committee to examine the possibility of setting up an asset reconstruction company or an asset management company to fast track resolution of stressed assets. Punjab National Bank’s non executive chairman Sunil Mehta will be heading the panel.
Bank of Baroda’s MD and CEO P.S. Jayakumar will be one of the members and another member would be nominated from State Bank of India. The committee will submit its report in two weeks. “A committee has been formed under the chairmanship of Mr. Sunil Mehta, non-executive chairman, PNB, which, over two weeks, will come out with recommendations [for] a suggestion that was deliberated with great detail among bankers today who believe it may be worth considering the set up of an ARC and/or AMC for faster resolution of stressed assets,” finance minister Piyush Goyal told the media after a meeting with chief executives of public sector banks.
Mr. Goyal said improving credit flow was one of the issues discussed in the meeting. “Several issues were discussed…particularly with respect to credit flow while mitigating the risks associated with that,” he said. The finance minister also said all vacant executive positions public sector banks would be filled up in one month.
Rising vacancies
At least five state-run banks do not have a chief executive, and several executive directors’ positions are also vacant. Some more vacancies are expected to arise in the coming months.
When asked if the Centre would increase capital allocation in PSBs in the current fiscal,, Mr. Goyal said it was too early to take a view on this issue. He said banks are selling non-core assets to boost capital and that resolution of stressed assets would also release some funds.
“All the banks will have to look at the balance sheet; they have to look at the money they will be receiving [while] shedding non-core assets… Once all of this is on the table, the Indian Banks’ Association can work with all the bankers and come out with what really is the need of these banks,” Mr. Goyal replied.
Rating agency Moody’s said on Thursday that the government’s recapitalisation plan for the 21 public sector banks will take care of the provisioning requirement for bad loans but will not be sufficient to support credit growth. The government has allocated ₹65,000 crore for capital infusion into 21 public sector banks during the current financial year.
