Chanda Kochhar, Managing Director and Chief Executive Officer of India’s largest private sector lender ICICI Bank, told ET Now in an interview that NPA ordinance is powerful and can be a milestone in enabling other resolutions. Kochhar was speaking on the ordinance on the resolution of non-performing assets (NPAs) that was promulgated on May 5 to tackle rising bad loans. The ordinance gives Reserve Bank of India (RBI) more powers to tackle bad loans.
As compared to the private sector, the bad loans number in public sector banks (PSBs) have increased sharply. The bad loan of public sector banks jumped by more than Rs 1 lakh crore during the April-December period of 2016-17. The gross NPAs of PSU banks’ in the first nine months of the current fiscal increased to Rs 6.06 lakh crore by December 31, 2016, from Rs 5.02 lakh crore during 2015-16. For private sector banks, gross NPAs rose to Rs 70,321 crore by December 31, 2016, from Rs 48,380 crore as on March 31, 2016.
Kochhar further added that top 50 cases would account for over 40 per cent of total NPA base of Rs 9 lakh crore.The NPA ordinance empowers RBI to make overseeing committees, however, the resolution will be slow as banks have not been able to make and implement timely decisions. She believes that NPA resolution would depend on sector and industry and would also depend on case-by-case basis and it will be hinged on overall leverage. The ordinance also empowers RBI to take cases to NCLT for resolution if required.
On the resolution process, Kochchar said, “a lot of building blocks are coming together to create an environment positive for resolution going forward. Some of the industries have started doing better so there is a visibilty of cash flows, especially that have currently been under stress, indicating an initiation of resolution process. Some of the larger corporates are now much more open to sell some part of their business and deleverage themselves, which will also help in NPA resolution.”
Welcoming the government’s ordinance move, Kochchar said this new ordinance helps by making overseeing committees, which will really push the banks into timely decision making and encourage resolutions.