The move follows former finance minister Yashwant Sinha's announcement at the time of presentation of the Union budget that a speedier and less cumbersome process needs to be in place for better asset recovery.At a meeting of chiefs of public sector banks held on Monday, RBI deputy governor SP Talwar said the apex bank will soon soon finalise the guidelines for setting up the SAC. According to sources, the RBI will announce a cut of date for all small loans to be referred to the SAC. "The objective is to avoid the long winding litigation process and instead go for compromise for speedy recovery of loans," sources said.

The meeting was attended by State Bank of India managing director (national banking) SR Iyer, Union Bank of India chairman AT Pannirselvam, Bank of India chairman S Rajagopal, Dena Bank chairman Ramesh Mishra, Punjab National Bank chief Rashid Jilani and Allahabad Bank CEO Harbhajan Singh among others.

Sources said that the committee will focus on recovering loans which are chronic cases in small scale sector, agricultural loans and trade finances. All three sectors comprise the bulk of the small loans in PSBs.

Bankers said that the SAC will have no legal powers but will aim at speedier recovery of loans through compromise settlements and more effecient recovery drives.

RBI governor Bimal Jalan while announcing the annual credit and monetary policy on April 20 said that guidelines have been issued to banks in 1995 for entering into compromise settlements for recovery of NPAs. "It has been represented that the present system and procedure of compromise settlement as it operates in reality in often long drawn, discretionary and cumbersome. Accordingly, government has directed PSBs to set up SAC so that chronic cases speciialy those relating to the small sector are settled in a timely and speedy manner," Jalan said.

The RBI, sources said, is going to provide uniform guidelines on setting up these SACs and banks will appoint their own officers to carry out the operations of the committee and will be responsible for recovery drives and compromise settlements.

Some of public sector banks have already set up internal panels chaired by former high court judges to steer the compromise cases. According to sources, theses panels will continue to function focussing on corporate defaults. "The SAC will specifically deal with small loans while the bigger loans will continued to be dealt with by the existing panel," one nationalised bank chief said.