New Delhi, June 19: In a move to ensure that credit flow to domestic industry is not hindered by the massive non-performing assets (NPAs), or bad loans, accumulated in the Indian banking system, state-run banks Tuesday decided to take up the genuine credit needs of companies through a two-stage process.
To be considered in the first stage are firms with credit needs of between Rs 200 crore and Rs 2,000 crore, while in the second stage the banks would take up accounts with borrowings of up to Rs 200 crore, Railway Minister Piyush Goyal, who also holds temporary charge of the Finance Ministry, told reporters here after meeting with heads of public sector banks (PSBs).
“All the banks have collectively decided that in two stages they will take up the credit needs of genuine, deserving, well-performing and good companies.
“In the first stage, who have borrowings between Rs 200 crore and Rs 2,000 crore, there are about four-and-a-half thousand such accounts in the PSBs, most of which are in consortium lending, and the PSBs, over the next 3 or 4 weeks, are going to do focus study of the credit needs of these good companies, good borrowers,” he said.
“In the second stage they will take up accounts with borrowings up to Rs 200 crore, and the banks will look into credit needs of all these companies, working collectively as a team.” The Minister said that in order to overcome the problem of NPAs, PSBs have decided to work in consortium instead of taking decisions individually.
“Banks will have a creditors agreement among themselves to iron out problems related to consortium banking. The 66 per cent rule regarding decisions in IBC (Insolvency and Bankruptcy Code) will now also be followed by consortium,” he said.
“Banks will take a covenant to work as a team, and not in silos,” he added.
Goyal also said the country’s largest lender State Bank of India, which made a presentation at the meeting, will help smaller PSBs to develop robust risk assessment processes.
“PSU banks will now concentrate on taking a focused decision. They are looking at an external committee to strengthen the banks’ working, to ensure that processes are followed and to examine whether these require to be upgraded,” he said. On the issue of NPA resolution, he said that a committee under Punjab National Bank Chairman Sunil Mehta has interacted with a number of bankers to work on the contours of “an Asset Restructuring Company/Asset Management Company” and a report is expected soon.
Open to RBI’s demand: FM
New Delhi: India’s central government is open to considering the Reserve Bank of India’s demand for wider powers to regulate lenders, Finance Minister Piyush Goyal said Tuesday. Reserve Bank of India chief Urjit Patel said in March that the regulator had “very limited authority” over state-run banks and had called for reforms to give the central bank more powers to police such lenders in the wake of a $2-billion fraud.