New rules will help solve NPA problem faster, say bankers

MUMBAI: The Union government’s decision to notify the Banking Regulation Amendment Ordinance met with optimism among bankers who believe that intervention by the RBI can accelerate the process of resolution of ₹9.6 lakh crore in stressed assets.

“The guidelines, once announced by the RBI, should facilitate quick decision-making and speed up resolution. This major policy move will greatly help the banking sector to resolve stressed assets. This will ensure that investments made and assets created become productive and contribute to economic growth,” said Chanda Kochhar, MD and CEO, ICICI Bank.

KVS Manian, president, corporate, institutional and investment banking, Kotak Mahindra Bank, echoed Kochhar’s view. “The government’s resolve to address the stressed asset problem in Indian banking is most welcome and the new ordinance empowering the RBI is much required. With close oversight, if the RBI can shepherd the process in a manner that will drive outcomes and speedier action on wilful defaulters, it will reduce the NPA overhang in the system. “

“This ordinance has set the momentum for the resolution of the top 50 stressed assets. Answers have been clear all along but resolutions were getting stuck because of indecision on the part of banks. With the current move, the RBI will create the right enabling process to speed up resolution,” said Rashesh Shah, chairman and CEO of Edelweiss Group.

Everyone, however, is not that optimistic.

“The ordinance is not a panacea to all problems related to resolution of stressed assets. Much of it depends on the ecosystem in which these companies exist and how fast the RBI is able to resolve these assets,” said Dinesh Kumar Khara, MD, State Bank of India.

“If the RBI is to direct when a resolution should happen, then it is an absolute disaster. However, if RBI’s intervention results in getting banks together and ensuring quicker resolution, then this scheme will work. Currently, different banks seek resolution at different times with private banks looking to cut losses and exit.,” added G Padmanabhan, chairman, Bank of India.