1. Intermediate mechanism for NPA resolution on anvil: Vinod Rai

Intermediate mechanism for NPA resolution on anvil: Vinod Rai

Worried over mounting bad loans, the Bank Board Bureau (BBB) is working out an "intermediate mechanism" to ensure early resolution of the problem and also to provide comfort to the bank management with regard to settlement of dues.

By: | New Delhi | Published: May 20, 2016 5:52 PM
vinod rai, bbb chief Worried over mounting bad loans, the Bank Board Bureau (BBB) is working out an “intermediate mechanism” to ensure early resolution of the problem and also to provide comfort to the bank management with regard to settlement of dues. (Express Photo)

Worried over mounting bad loans, the Bank Board Bureau (BBB) is working out an “intermediate mechanism” to ensure early resolution of the problem and also to provide comfort to the bank management with regard to settlement of dues.

“We are putting in place an intermediate mechanism which will analyse some of the processes which would be triggered to settle the NPAs that the banks are carrying on their balance sheets,” Vinod Rai, chairman of BBB told reporters on the sidelines of an industry event.

That intermediate mechanism will provide a certain degree of comfort to the management of the bank — chief executive or the executive director — he said, adding there are two kind of issues, one is process of resolution, the other is the pricing at which the resolution takes place.

“Pricing is the commercial judgement of the institution. And I don’t think it would be fair to have an outside agency take that decision,” he said.

When asked by when it would be in place, Rai said, “It’s all being thought out. We have not crystallised our thinking. But there will be an intermediate mechanism. It will give a lot of comfort to bank decision makers and it will be very credible.”

The entire thing will be rolled out in a fortnight, he said without giving much details of it.

Asked if it will be under the Bureau, he said it will be outside BBB and would be in domain of banks.

Last week Rai had stressed that the bad loans situations was not alarming and said all public-sector banks have got their strategies in place to tackle the stressed asset woes.

The gross non-performing assets (NPAs) of PSBs rose from Rs 2,67,065 lakh crore in March 2015 to Rs 3,61,731 lakh crore in December 2015.

Punjab National Bank, earlier this week, reported a record high quarterly loss by any public sector lender at Rs 5,367 crore for the fourth quarter ended March 31, 2016.

Before this, several banks including Bank of Baroda, Syndicate Bank, UCO Bank and Allahabad Bank reported loss in their quarterly balance sheet due to bad loans pressure.

Asked if holding company for public sector banks are being considered, he said, it would be much later.

“Our priorities are the vacancies and lending process. Holding company and consolidation will come later,” he said.

The process has started, Rai said adding, “hopefully you will have more of them and create some large entities.”

Earlier this week, top state-run lender SBI proposed merger of its five associate banks and newly created Bharatiya Mahila Bank (BMB) with itself, a move that will create Rs 37-lakh crore banking behemoth with over 50 crore customers.

The Bureau was constituted earlier this year to help the government select heads of public sector banks and financial institutions and assist banks in developing strategies with regard to capital-raising and consolidation. Rai further said RBI is also preparing guidelines on the issues faced in case of joint lending by banks.

Asked if there is fear of judiciary in dealing with NPA resolution, he said, right corners of judiciary is being sensitised about time and process.

“Right corners are being sensitised and hopefully things will fall in place in the future,” he said.

On bad loans, he said the issue of NPA will be overcome and it is only a question of time. “We have dealt in past and we will be able to overcome this time as well.”

Rai asked experts from various professions to come forward and offer their services in the boards of the banks.

“This will be paradigm shift and will create an ecosystem for emergence of large, strong and professionally run financial institutions and banks in the country,” he said.

He also called for instilling an element of transparency, ethics and probity in the business of the financial sector in the backdrop of the loss of trust between government to Business, Business to Business as well as with financial institutions and business.

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Tags: NPA
  1. V
    May 22, 2016 at 1:01 am
    I don't understand the relevance of this article? Is the mandate of BBB to manage the loan portfolio of banks? I thought BBB was set up for selection of PSB bank ceos.
    1. M
      May 22, 2016 at 8:21 pm
      Isnt this supposed to be media darling, Raghuram Rajan's baby? What is his super economist background useful for, except speeches, of course?
      1. M
        May 22, 2016 at 8:19 pm
        No, it was also to see adequacy of funding and lending processes. Thats why the composition.
        1. Balakrishnan Gurumurti
          May 22, 2016 at 6:16 am
          Agreed to Rai views, my considered view is now simultaneously investigate how the over whelming loans were given who were the people track them, first ; after all it is given to understand, some men in power forced the banks over telephone calls, not to pressurize the borrowers, obviously would be the men of felonies; they need to brought to book; that would ensure in the future that kinds of pressure would not arise ; if those worthies are brought to justice, that way Apex and High courts order SITs to go deeper in ; as politicians are involved for various obvious reasons; the state or central governments can not be the right powers to supervise SITs,.
          1. Balakrishnan Gurumurti
            May 22, 2016 at 6:35 am
            Good article; Rai is right. he can do what he said. but my considered opinion is some powerful worthies then when NPAs were shooting up, those great worthies brought pressure on banks' managements to be cool on NPAs.. they need to tracked down by SIT investigation, directly under high courts and the Apex courts, so that no politicians and Executives could interfere, else that would be like CM Mr Fernandes as chairman of TAC in maharashtra wanted to go cool on faked caste certificate holders numbering about one lac public servants since 1976; thank God rightly Aurangabad bench of Bombay high court rightly sta; saying if you want bring in a statute, obviously that would be struck down by the court under 'ultra vires' principle; we need to know the faces of those great men in human form who really involved in the NPA related matters; like some politicians in Rajasthan and MP simply got involved in Lalit Modi and recruitment scam, saying humanity; but inhumanly killed so many persons in MP; but that man involved still ruling as C/M; so we need to keep such 'soft' hearts away here too ; that is possible only by judiciary none else; so judiciary shall not sulk under so called 'judicial restraint' but unveil the veils of those 'soft hearts' too her too; that will enable no further such instances would try to derail the economy - the reasons might be like reservation concepts allowed in under dubious statistics that veiled Mondal commission; though then PM Morarji bhai simply shelved that great dubious report; but great worthy in later PM VP Singh pla the reservation by using that so called dubious report and made possible the reservation other than SC/ST reservation; then it again floated under 'creamy layer' idea of another 'soft hearted' Karunakaran of Kerala as her's CM. courts need to use judicial review is the obligation under art 51A of the courts too besides all other wings p Executive and the legislature, is being reiterated. sir. tks
            1. Balakrishnan Gurumurti
              May 22, 2016 at 6:44 am
              Please note today i find so many free advertising companies on cyber internet - they obviously support the fake job giving small outfits that take upfront 3000 or 4000 rupees from gullible public; could we allow as Executive or the Legislative function, i say courts need to take on that way the gullible public could be saved; if not riotous situations might emerge, unless we love riots, so the courts indeed sup motu look , i have seen a lot of advocates are involved in this racket besides chartered accountants; do we say is it an independent india for these racketeers, so also the worthies who forced the banks to be cool on the NPAs this had been going on for about 20 years or so,more apparently since 2000.
              1. Balakrishnan Gurumurti
                May 22, 2016 at 6:36 am
                what happened to my posts my dear journalists friends!
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