As the bad loans have been increasing over the years, the Reserve Bank of India and the finance ministry is set to finalise some changes in the rules regarding the non-performing assets to give a push to growth. Union Finance Minister Arun Jaitley held a meeting with top RBI officials and bankers last week, and a roadmap is being worked out to deal with the issue of NPAs in near and medium term. Top officials have acknowledged the need to resolve bad debts, in order to push economic growth and reinvigorate the investment cycle.
The scheme being finalised include changing the existing Joint Lenders Forum for faster resolution of NPAs (non-performing assets), a scheme for one-time settlement of bad debts and penal action for defaulters who have siphoned off loans taken for business purposes. Sources said that state-owned banks have been asked to conduct a forensic audit of top 50 loan defaulters to separate genuine cases of business failure from those where funds have been diverted.
While the government is unlikely to set up a state-owned Bad Bank to take over NPAs from state-owned banks in the near term, the Department of Financial Services has been asked to review the existing framework of private asset reconstruction companies over the next few months and submit a report.
A large-scale auction of bad debts is also being looked into by the government, said sources. Changes have been proposed to the Joint Lenders’ Forum (JLF), which deals with large NPA cases wherein multiple banks are lenders to a single company.
Even the Department of Financial Services has been asked to review the existing framework of private asset reconstruction companies over the next few months and submit a report.
The figures for bank NPAs are alarming. They surged by over Rs 1 lakh crore during the April-December period of 2016-17. Gross NPAs in the first nine months of the current fiscal rose to Rs 6.06 lakh crore by December 31, 2016, from Rs 5.02 lakh crore during the entire year of 2015-16. The gross NPAs were Rs 2.67 lakh crore at the end of 2014-15. The amount of total stressed assets, which comprises NPAs and restructured loans, is much higher.