Bad bank could be alternative for large bank NPAs: Jaitley

Bad bank could be alternative for large bank NPAs: Jaitley

Bad bank could be alternative for large bank NPAs: Jaitley

The government is considering several alternatives including creation of a bad bank which can take over bad loans of public sector banks as the NPAs reach a historic Rs 6.95 lakh crore.

“Several possible alternatives exist and the issue is being debated on public platform,” Finance Minister Arun Jaitley said at the Parliamentary Consultative Committee meeting on Wednesday.

He said there could be more oversight committees to look into the process of cases referred by different banks.

Jaitley said though NPA levels in the steel sector have come down, they still are at 24% compared with textile at 6.8%, and power and road at about 4.5%.

“Non-performing assets of the banks is a challenging task even though they have shown a declining trend in the last quarter of the current financial year. The core problem of NPAs is with very large corporates, though a few in number, predominantly in the steel, power, infrastructure and textile sectors,” he said.

According to Jaitley, these sectors had expanded their capacity during the boom period (2003-08), but could not face the onslaught of global financial crisis and consequent slowdown thereafter.

He said the government was taking sector specific measures to deal with the problem of NPAs specifically in the resolution of large debts.

Members of the committee at the meeting suggested that since Asset Reconstruction Companies (ARCs) are in private sector and their performance is not up to the mark in many cases, therefore, close monitoring of the operations of ARCs be done through stringent regulations especially in the wake of decision to allow 100% FDI in the ARCs through automatic route.