Stressed assets resolution mechanisms need more teeth, says RBI Deputy Governor

MUMBAI: Discussions are on to improve the working of the joint lenders' forum and oversight committee set up to resolve the problem of stressed assets at banks, Reserve Bank of India deputy governor SS Mundra said.

“I think we need to provide more strength to the processes and that is where there are discussions going on whether the institution of oversight committee can be further enlarged or strengthened and similar thing is being looked at with regard to the working of the JLF mechanism," Mundra said on the sidelines of the launch of Bandhan Bank's branch here on Thursday.

Lessening the debt burden of banks has become a priority issue for authorities as it weighs on their performance and hurts ability to lend at a time when the government is working hard to stir up economic activity. The overseeing committee was set up to ensure that a key scheme to tackle the problem was implemented in a transparent manner. The scheme for sustainable structuring of stressed assets allows banks to restructure stressed loans to highly indebted but running project by converting a part of the debt into equity. Bankers want the committee to have wider powers so that the decisions vetted by it won't face any probe by agencies such as the CBI.

Various stakeholders have come to a conclusion that a one-size-fitsall solution won't work and nonperforming assets would need to be handled on a case-to-case basis, Mundra said. “Even in the recent past, there has been a very active engagement between the RBI, the government and various other stakeholders,“ he said. “The point which comes out very clearly is that there would be variety of cases where we will need to use different instruments. There is no umbrella solution for everything.“ According to finance ministry data, bad loans rose by over Rs 1 lakh crore in the first nine months of the current Rs 6, 06,911 crore. Gross fiscal year to NPAs were Rs 2,67,065 crore at the end of 2014-15. Bulk of the bad loans has come from the power, steel, road infras tructure and textiles sectors. The RBI deputy gov ernor said the March 31 dead line given to banks to clean up their balance sheets still re mains.