The ordinance amending the Banking Regulation Act to give banks the right to deal with every case of bad loans individually, has apparently rattled the loanees, especially corporate and business houses.
Trade body ASSOCHAM went through the formality of lauding the government's move, but proposed the creation of a Stressed Assets Funds (SAFs) with cash rich public sector firms joining in to turn the NPAs into performing assets.
In a press release, ASSOCHAM president Sandeep Jajodia said they expect “a pragmatic and a practical approach by the lenders (the banks) and the regulators (RBI, for one), in the face of the situations on the ground in different sectors of the economy, that remain under stress”.
Obviously, they prefer a sectoral approach to the problem of stressed assets and NPAs. Barring a few and exceptional cases, most of the NPAs in stressed sectors like steel, power, telecom or infrastructure, have resulted from adverse business cycles marked by crash in commodity prices, making investments worth several lakhs of crores of rupees unviable, he said. “This is a worldwide phenomenon.”
The trade body has said they will cooperate with the government and the RBI in finding immediate and sustainable solution to the NPAs in PSUs, but there was no suggestion or indication that the borrowers would unleash their sources to make good the assets of PSUs.
The SAF can help in revival of the assets under high leverage. “Once these assets are brought back to shape, the paybacks to the SAF can take place. Different forms of the SAFs can be thought of, including some of which can be neutral to creating a hole in the government finances,” Jajodia said.
The composition of the oversight committee was a matter of concern. “The key would be to have persons of high integrity on these oversight committees, which then should be given all-out support from the government to help the lenders resolve the top NPA accounts within a time-bound period. What is equally important is that the persons mandated with the task can be rest assured that there would be no fear of vigilance bodies after decisions involving some losses for the sake of reviving the stressed assets are taken in good faith,” said Jajodia.
The trade body wanted “adequate working capital” to be extended to existing promoters, in cases where the NPAs can be turned into healthy assets.
