The Reserve Bank of India (RBI) has called a meeting with leading public sector banks on Wednesday to discuss issues related to the non performing assets (NPA) of banks. The meeting is being held on the behest of the RBI which wants to form a working group for NPA manangement. There is also a likelyhood of sub committees being formed for the purpose. This will be the first meeting between the RBI and the banks following RBI's decision to set up a working group for NPA management. Sources said the meeting will be attended by A Ghosh, department of banking supervision - RBI and heads of recovery cell from the leading banks.
RBI has set up the working group with an aim to standardise the NPA management and discuss the grass root problems related to NPA. The group will recommended to RBI the policy changes that can be introduced to achieve the same.
"The RBI is concerned about the growing NPA among banks and financial institutions and is planning out a strategy that can be evolved to reduce the NPA levels," said senior officials from RBI "Alternatively, India will have to pay a heavy price, like South-east Asian countries, if the NPA level is not reduced soon. Already the gross NPA level of banking sector is close to 18 per cent and to added to it there are instances of window dressing in NPA level displayed by the banks and FIs," added the officials. The group will work towards framing guidelines on write-offs, settlement package for the NPA. The group will formulate a criteria for all banks in case of provisional write off, final write off and comprise settlement. Issues related to debt recovery tribute will also be discussed.
RBI is also likely to set up some sub - committees on different aspect related NPA management. "This being the first meeting, it will discuss the suggestion given by the Narasimhan Committee second report on banking sector reform and Pennir Selvam Committee on NPA management. At present, RBI has set up a guideline pertaining provisions that banks requirement to make in case of sub-standard, doubtful and bad assets, there is no set norms for comprise and settlement. "Each banks take an independent decision on when it decide to waiver the loan and the type of comprise settlement it would prefer, " said banker.