Banks may set up ARC for stressed assets, says Goyal

MUMBAI: Finance minister Piyush Goyal on Friday announced the formation of a committee that he said will come up with recommendations to set up a mechanism for the speedy resolution of stressed assets in the banking system.

“(Banks have set up) a committee under the chairmanship of Sunil Mehta, non-executive chairman of Punjab National Bank, which, over the next two weeks, will come out with their recommendations on the setting up of an asset reconstruction company and/or asset management company for faster resolution of stressed assets,” he said.

Gross non-performing assets in the banking system were at ₹10.3 lakh crore as of March 2018.

The minister was in Mumbai meeting the heads of public sector banks from the west and south zones to discuss ways to improve credit flow in a “risk-mitigated manner and also help banks achieve global standards in terms of governance and banking process”.

Banks are exploring a strategy to deal with accounts that face working capital constraints due to their exposure to banks under prompt corrective action, he added at a press conference.

Banks are looking to set up an oversight committee that will consist of retired judges, vigilance officials and external regulators to take decisions faster, Goyal said.

On further capital infusion, the minister said that it’s too early to assess the capital needs of all state-owned banks. However, he said that the government is committed to supporting the capital needs of these banks.

Goyal also made it clear that banks would have to take a final call on consolidation and maintained that the government

› ICICI Bank is a good bank. It has a robust process. There is no cause of concern for any of the stakeholders

PIYUSH GOYAL, finance minister

would not micromanage what bankers should be doing.

Rajnish Kumar, chairman, State Bank of India, who was present at the meeting, said that the Indian banking system is currently fragmented. “The size of Indian banks compared to global banks is still small. Such a fragmented banking system is not able to support the growth aspirations of the country,” he said.

Goyal allayed concerns on corporategovernance issues regarding ICICI Bank, following allegations against its managing director on possible conflict of interest over loans made to the Videocon group.

“ICICI Bank is a good bank. It has a robust process. There is no cause of concern for any of the stakeholders... the law of the land will take its own course and the processes are going on both internally and externally which will come out with findings,” he said.

The minister also said that the government will fill up executive positions in public sector banks in the next 30 days.