With the banking sector reeling under the impact of Rs 8 lakh crore stressed assets, the government and Reserve Bank of India on Friday drew up a plan to act on top defaulters.
Sources told HT, finance minister Arun Jaitley discussed with RBI officials various options to deal with the menace of non-performing assets (NPAs) which was plaguing the banking system and preventing lenders from lowering interest rates.
One of the alternatives that the government and RBI was considering for some time now was to set up of a “bad bank” to deal with the problem of non-performing loans, as it has been suggested by chief economic adviser Arvind Subramanian.
Reserve Bank Deputy Governor Viral Acharya had floated the twin concept of Private Asset Management Company (PAMC) and National Asset Management Company (NAMC) for resolution of stressed assets.
Gross NPAs of public sector banks rose to Rs 6.3 lakh crore as against Rs 5.5 lakh crore at the end of the June quarter.
Last month, Subramanian had said the idea of setting up a state-owned asset reconstruction company (ARC) or bad bank to deal with mounting NPAs is gaining traction and needs to be created quickly.
The PAMC plan, as suggested by Acharya, could be for sectors such as metals, construction, telecom, and textiles, where the assets will have economic value in the short run.
As per the plan, the banking sector may be asked to restructure about 50 large stressed exposures in these sectors by December 31, 2017.
The NAMC plan could be viable for sectors where the problem is not just of excess capacity but of economically unviable assets in the near term.