The government and the Reserve Bank of India (RBI) are looking to further tghten recovery norms for wilful defaulters to counter the persistent issue of rising non-performing assets (NPA) — loans that do not yield returns.
While the issue is being looked into and discussions expected to start soon, sources said that defaulters if found wilful, might not be given the flexibility of time and recourse processes which unnecessary derails the recovery process.
Finance minister Arun Jaitley last week said that the recovery process would be further tightened. A committee has already been constituted to look into the issue.
“It is too early to say how the norms will be further tightened but there has been significant rise in the non-performing asset level and this needs to be addressed and one of the ways is to ensure that wilful defaulters are not given unnecessary freedom and flexibility of time to delay the process,” an official source who refused to be identified told Hindustan Times.
“It is important that norms are further tightened as this would help the banks in the recovery process, once a borrower is proved to be a willful defaulter, stringent action must be taken and banks must be allowed more teeth for the same,” said M Narendra, chairman and managing director, Indian Overseas Bank.
NPA level in government banks rose to 4.72% or Rs. 2,16,729 crore as of March 2014 while it was 3.84% in the corresponding period in 2013.
The government and bank managements are also undertaking regular reviews of large-sized NPAs. In a bid to address the situation, banks have already been asked to deny additional loans to promoters of companies that have defaulted on repayment.
Besides, promoters of companies seeking corporate debt restructuring might also be asked for a list of personal assets which will be treated as collateral.