The new ecosystem created by the government to resolve NPAs comprises the Insolvency and Bankruptcy Board of India, NCLT and the NCLAT
The National Institute of Bank Management plans to conduct workshops on the new ecosystem created by the government for resolving ballooning NPAs. NIBM is also going to conduct programmes to help banks under the prompt corrective action (PCA) of the Reserve Bank of India to come out of the PCA and improve their financials, KL Dhingra, director, NIBM, said at the 48th Foundation Day of NIBM. “RBI has put six public sector banks under Prompt Correction Action, which indicates that these banks need to focus on their financials and asset quality. This also puts certain restrictions on these banks. NIBM proposes to conduct specialised courses for the officers of these banks for enabling them to steer their banks out of the PCA, as early as possible,” Dhingra said.
The increasing level of NPAs in the banking sector, more particularly of the public sector banks, is a cause of concern for the Centre and it has come up with the Insolvency and Bankruptcy Code 2016 and created the new “ecosystem for resolving the issue of ballooning NPAs”, he said. The ecosystem comprises the Insolvency and Bankruptcy Board of India, National Company Law Tribunal and the National Company Law Appellate Tribunal, and bankers need to be trained to work in the new systems. According to Dhingra, the total number of participants attending NIBM training programmes had gone up by 93% during the last three years.
Speaking on ‘Regulatory technological and human resource challenges for enhancing effectiveness of Indian banks’ at NIBM, Usha Ananthasubramanian, MD & CEO of Allahabad Bank, said the Indian banking sector is at a critical juncture in its evolution and it is now clear that the slump in credit growth and increase in stressed assets has affected the profitability of all banks, and threatens the very survival of some of them. “Shifts in consumer preferences, combined with changes in technology and regulations, have created a perfect storm,” she said.
Ananthasubramanian said the operational risks the banking sector faces due to changing customer expectations and technology and this could cause massive alterations in banking and give it an entirely different profile. Technology has not only been changing customer behaviour, but will also enable new risk-management techniques, often coupled with advanced analytics, she said. Specialised banking has also thrown up a different type of competition. Advanced technology, sleek workforce and hassle-free last-mile delivery are their positives vis-a-vis legacy banks, she pointed out. On the human resource challenges, Ananthasubramanian said the middle-management ranks of banks are being thinned by retirements, which has not been offset with adequate fresh recruitment. Banks need experts in specific areas like project evaluation, treasury, HR and risk management, she said.