RBI to crank up heat on NPAs

NPAs worth `8L-cr may face bankruptcy proceedings by March 2019

New Delhi, July 16: Emboldened by the Banking Regulation (Amendment) Ordinance, the RBI is expected to push for resolution bad loans worth around `8 lakh crore by March 2019, a move that could bring down the NPAs and improve the financial health of banks, a study by Assocham said.

“So, it should be safe to assume that the non-performing assets (NPAs) mess would largely be resolved by the first quarter of financial year 201920,” Assocham study titled ‘NPAs Resolution: Light at the end of tunnel by March 2019’ said.

This would be helped by a combination of several factors — turnaround in the economic cycle and some resolute steps by the government and the Reserve Bank to fix the issue, it said.

Although entire NPAs could be put on the altar of Insolvency and Bankruptcy Code (IBC) resolution mechanism, it has to be seen how much and how fast they actually goes out from the balance sheets of banks which at this point of time seem very stressed, it said.

It is no secret that NPAs are a big drain on the financial health of banks especially public sector banks (PSBs).

For example, 27 PSBs collectively made an operating profit of `1.5 lakh crore in 2016-17, but after allowing for the provisioning for bad loans, among others, net operating profit slipped to a paltry `574 crore.

If balance sheet numbers are anything to go by, it simply brings home the fact that banks have no capacity to do fresh corporate lending that is necessary for pushing subdued private sector investment, it said.

Releasing the report, Assocham secretary general D.S. Rawat said it is to be noted that the 16-month Asset Quality Review (AQR) exercise that ended in March 2017 pulled out NPAs from the closet and after this deep surgery strong medicine was required to quickly heal the system.