Arun Jaitley, Urjit Patel talk bad-debt mess
Union Finance Minister Arun Jaitley on Friday held a closed-door meeting with the Reserve Bank of India Governor Urjit Patel and senior officers of the central bank and finance ministry to discuss ways of resolving the issue of burgeoning levels of toxic assets of banks. The officials discussed ways to deal with non-performing assets, estimated at more than ~9.5 lakh crore.
Union Finance Minister Arun Jaitley on Friday held a closeddoor meeting with Reserve Bank of India (RBI) Governor Urjit Patel and senior officers of the central bank and finance ministry to discuss ways of resolving the issue of burgeoning levels of toxic assets of banks.
According to sources, the officials discussed ways to deal with non-performing assets (NPAs), estimated at more than ~9.5 lakh crore.
However, no decision was taken. Officials who attended the meeting said there would be more meetings and a decision would be taken soon.
RBI Deputy Governors Viral Acharya and SS Mundra were present in the meeting. From the ministry side, apart from the finance minister, Financial Services Secretary Anjuly Chib Duggal and Chief Economic Advisor Arvind Subramanian were present.
“We have taken various suggestions from the finance ministry and RBI officials for the resolution of stressed assets, and will concretise the decisions soon. There will be more meetings before a decision is taken,” said an official.
Issues including the prospect of floating a state-owned bad bank or an asset management company were discussed.
However, even before the meeting, top government sources who are part of the decision-making process said the Centre was not keen on the prospect of a state-owned bad bank simply because it didn’t want to be seen using taxpayers’ money to bail out private enterprises.
“Any proposal that involves taxpayers’ money to pay off corporate defaults is not a good idea,” a top official said.
Still the idea of bad banks was discussed, largely in line with what Acharya had said in his maiden speech on February 21. Officials in the RBI and the finance ministry’s department of financial services have worked on the possible structure of such an entity.
Gross non-performing assets of banks as of December 2016 were more than ~6 lakh crore. And estimates suggest that the stressed assets, put in various baskets of technicalities, were at least 12.5 per cent of the loans, or about ~9.5 lakh crore. More than half the present stress came to the fore after the RBI’s asset quality review last year.
The meeting also discussed asset reconstruction companies and how to ensure that the firms had a meaningful play in the bad debt market.