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Finmin plans new entity for flushing out NPAs

Thursday, 5 June 2014 - 7:15am IST | Place: New Delhi | Agency: dna

The finance ministry led by Arun Jaitley is considering a six point agenda to handle the menace of the non-performing assets (NPAs) worth Rs two lakh crore in the banking system. To top it, the government is planning to set up a National Asset Management Company, to take over the bad debts of the banking consortiums, and re-energising fourteen asset reconstruction companies in the country.

There are four other initiatives that the North Block is considering given the urgency of the matter as the new government has accorded this issue the topmost priority.

Speaking about the setting up of the company, a finance ministry official told dna, "We are as of now in discussion with the banks on the stake holding pattern for the new entity. It is likely to be a 51:49 partnership between the government and the banks. The amount of capital each of the public sector banks will put in will be decided in due course. The company will take over the NPAs on its balance sheet and will also work for the revival of the sick units."

The other issues that the government is examining are creating a special resolution mechanism for the infrastructure sector, re-looking at corporate debt restructuring mechanism, improving the effectiveness of the insolvency regime, and liberalising norms to increase capitalisation of asset reconstruction companies. "The fourteen asset reconstruction companies need a push. We are looking at various ways of incentivising their operations," said the official.

As a part to holistically address the matter, the government is also looking at ways to fast-track the dispute resolution mechanism. Going forward, certain changes will be made in the DRT legislation. The idea is to make the tribunal dispense the Cases in a time-bound manner. As of now there are lots of adjournments and there are over 45,000 cases pending in 33 Debt Recovery Tribunals (DRT) across the country.

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