The Indian Express (Delhi Edition)
NPA resolution: Govt, RBI may adopt strategy involving pvt ARCS
TO RESOLVE the vexed issue of stubborn levels of non-performing assets (NPAS) with banks, the government and Reserve Bank of India (RBI) may adopt a strategy wherein private asset reconstruction companies and an asset reconstruction company (ARC) in which the government is a major stakeholder will both have roles - the former to deal with assets that have ample chances of turnaround and the latter to address the more difficult ones.
While this idea figured prominently as finance minister Arun Jaitley held a key meeting with RBI Governor Urjit Patel and other top officials here on Friday, the performance of existing private-sector ARCS also came up for scrutiny, according to sources. A final decision was not taken, the sources said, adding that the government and central bank would have another meeting to dwell upon the matter soon.
The bad loan crisis has bled the balance sheet of banks, while severely affecting investments by the private sector. RBI deputy governor Viral Acharya had earlier proposed the setting up of a private asset management company and a national asset management company. Chief economic adviser Arvind Subramanian had floated a public-sector ARC to address what he calls the twin balance sheet problem afflicting banks and corporates.
The idea is to segregate banks’ NPAS from the healthy ones and also bolster banks’ capital base simultaneously, so that they can play a signal role in boosting private investment.
The meeting was convened amid reports authorities are considering a harder crackdown on a list of wilful defaulters.
The meeting was also attended by RBI Deputy Governor Viral Acharya and S S Mundra, besides Chief Economic Adviser Arvind Subramanian, Principal Economic Advisor Sanjiv Sanyal, Financial Services Secretary Anjuly Chib Duggal and Corporate Affairs Secretary Tapan Ray, according to PTI. FE & PTI