Banking amendments to help fix NPAs: Fin Secy

Prez Pranab is likely to promulgate an ordinance giving greater powers to the Reserve Bank to tackle mounting bad loans, a top source said

The finance ministry on Thursday swore by the changes proposed in the banking law that it said will go a long way in effectively resolving the problem of bad loans plaguing the banking sector. "It is not possible for me to put down a number on how this (non-performing assets or NPAs) will go down, but certainly we feel that these changes will make the system more effective in handling the bad loans," Finance Secretary Ashok Lavasa told reporters here.

The Cabinet on Wednesday approved promulgation of an ordinance to amend the Banking Regulation Act for resolution of the NPA problem. As per law, an ordinance has to be ratified by Parliament within 6 months of its promulgation. So, when the Monsoon Session begins, the law will be taken up by both the Houses for discussion and passage.

"The proposed amendments

will enable banks and the RBI in the resolution of stressed asset cases," Lavasa said, adding that the government will share details after the ordinance is notified.

Lavasa said that on the back of professionalism in the country's banking system and with the participation of the promoters themselves, "we should be able to reach resolution in many of the cases". After discussing the issue with stakeholders, the government came to the conclusion that some changes are necessary in the statute to effectively deal with the mounting bad loans in the banking sector, he said. Lavasa, however, did not disclose the details.

"In totality, the entire mechanism to deal with NPAs needs to be made more effective. After all, lending decisions are taken by bankers, so this (calls for) the bankers to apply themselves and take decision about changes required according to regulation. So, bankers have to sit down and work out which is a feasible step," the secretary said.

He further said there is enough appetite in the market to buy stressed assets. "We should not judge the capacity that is there in the market because people do have appetite for investment in the Indian market.