The finance ministry has said the changes proposed in the banking law will go a long way in effectively resolving the problem of bad loans plaguing the banking sector.
Speaking to reporters in the national capital, Finance Secretary Ashok Lavasa said: “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.”
The Cabinet earlier this week approved promulgation of an ordinance to amend the Banking Regulation Act for resolution of the NPA problem, the New Indian Express reported.
According to the law, the Parliament has to ratify an ordinance within six months of its promulgation. Thus, when the Monsoon Session begins, the law will be taken up by both the Houses for discussion and for its passage.
“The proposed amendments will enable banks and the RBI in the resolution of stressed asset cases,” Lavasa said, adding the government will share details after the ordinance is notified.
The finance secretary said 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 were necessary in the statute to effectively deal with the mounting bad loans in the banking sector, Lavasa said. But he did not divulge any more details regarding it.
“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,” Lavasa added.
Stating there is enough appetite in the market to buy stressed assets, he said: “We should not judge the capacity that is there in the market because people do have appetite for investment in the Indian market. India is probably one of the best destinations for investment at this point of time.”
He is of the view that the NPA situating has not worsened in the recent past and there has been a marked improvement in some of the infrastructure sectors like power and road.
Toxic loans of public sector banks (PSBs) rose by over Rs 1 lakh crore to Rs 6.06 lakh crore during April-December of 2016-17, the bulk of which came from power, steel, road infrastructure and textile sectors.
Gross NPA of PSBs nearly doubled to Rs 5.02 lakh crore at the end of March 2016, up from Rs 2.67 lakh crore at the end of March 2015.