Iron & steel, power, roads, textiles and infrastructure segments are being looked at for special restructuring; banks trying to resolve small and mid-sized accounts
On a warpath to resolve the bad loan problem, heads of the public sector banks met Union finance minister Arun Jaitley on Monday to discuss the progress made in the resolution of the non-performing assets, which has reached to Rs 7.65 lakh crore at the end of the quarter ended March 31, 2017. Banks have submitted the list of 50 large accounts that need resolution.
The list will be approved by both the government and Reserve Bank of India (RBI) to plan out the sectoral resolution of bad debt that will be undertaken after the central bank finalises the proposals.
Sectors that will be looked at and get special restructuring are iron & steel, power, roads, textiles and other infrastructure segments.
"RBI is at a fairly advanced stage of preparing a list of those debtors where resolution is required through Insolvency and Bankruptcy Code (IBC) process, and you will be shortly hearing about it," Jaitley told reporters after the morning session of a meeting with chairman and managing directors of PSBs to review the situation on non-performing assets (NPAs).
"Eighty-one cases have been filed under the IBC. Of these, 18 cases have been initiated by financial creditors. These are already before the National Company Law Tribunal and since the bulk of NPAs, about 70%, are either in consortium or multiple banking arrangements a speedy resolution is required," Jaitely said.
Bankers told Jaitley that are trying to resolve some of the mid-sized and smaller accounts where consortium of banks are not involved. Banks are also filing cases with the NCLT so that a speedier resolution emerges. They are also prepared to take some haircuts (interest rate waivers) to resolve the bad debt.
In the detailed presentations made at the meeting, it emerged that in 2016-17, PSBs have made a stable operating profit of Rs 1.5 lakh crore. Subject to various provisioning requirements, their net profit stood at Rs 574 crore.
The asset quality outlook for the banking sector will remain weak, said Icra, Moody's Investor Service's Indian affiliate. It estimates gross NPAs to swell to Rs 8.2-8.5 lakh crore (9.9-10.3% of total advances) by the end of FY18 from Rs 7.65 lakh crore (9.5%) at the end of March 2017.
Goods and service tax preparedness of the banks were also discussed.
"Banks will have to register separately in each state under GST. They do not have any option. That is the law under GST. We will try to ease out any hassles," revenue secretary Hasmukh Adhia told reporters after meeting heads of the PSBs.
Icra said the recent ordinance by the Centre for amendment in the Banking Regulation Act of 1949 is a positive for the banks because it highlights the urgency and the willingness of the government to resolve the stressed asset challenges of the banking system.
...& ANALYSIS
- The list of NPAs will be approved by the government and RBI to plan out the sectoral resolution of bad debt
- Banks are also filing cases with the NCLT so that a speedier resolution emerges
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 "Arun Jaitley")
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"Eighty-one cases have been filed under the IBC. Of these, 18 cases have been initiated by financial creditors. These are already before the National Company Law Tribunal and since the bulk of NPAs, about 70%, are either in consortium or multiple banking arrangements a speedy resolution is required," Jaitely said.
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