Top loan defaulters' list almost ready: Arun Jaitley

Jaitley says states offering farm loan waivers will have to generate funds from their own resources

Union Finance Minister Arun Jaitley said on Monday that the Reserve Bank of India (RBI) was at “a fairly advanced stage” of preparing a list of borrowers from whom non-performing assets (NPAs) of public sector banks could be recovered under the Insolvency and Bankruptcy Code. The move, he said, would help beleaguered public sector banks (PSBs) recover part of their NPAs, estimated at over Rs 6 lakh crore.  

Jaitley’s remarks came after he, along with RBI and finance ministry officials, held a meeting with the heads of PSBs and took stock of problems affecting the lenders.   

“Under the new Ordinance issued, the RBI is at a fairly advanced stage of preparing a list of those debtors where a resolution is required through the Insolvency and Bankruptcy Code (IBC) process. You will be shortly hearing about it,” he said.

The Centre issued an Ordinance last month by amending the Banking Regulation Act, to empower the central bank to recover mounting NPAs of the state-owned banks. The Ordinance essentially empowers the RBI to ask banks to initiate insolvency resolution proceedings for bankruptcy code cases and recover bad loans.  

Jaitley said the meeting did not discuss the issue of consolidation in the banking space, but added it was being “actively considered”. He refused to divulge any names due to price sensitiveness.

On farm loan waivers being considered by a few Bharatiya Janata Party (BJP)-ruled states, the finance minister said resources would have to be generated by the states themselves and that the Centre would not be part of it. Uttar Pradesh and Maharashtra have already announced the loan waiver, subject to certain conditions. 

RBI Deputy Governor S S Mundra, who attended the meeting, said an internal advisory committee had been constituted for identifying accounts to be actively considered for resolution. 

Mundra said the RBI was collecting information from banks on certain large accounts and action points. “I think, soon some of the action points will emerge from that,” he added. 

About 81 cases have been filed under the Insolvency and Bankruptcy Code. Of these 18 cases have been initiated by financial creditors.

“These are already before the National Company Law Tribunal (NCLT) and since a bulk of the NPAs, about 70%, are either in consortium or in multiple banking arrangement, the speedy resolution is required,” Jaitley said. 

He said a few bankers expressed apprehensions about the infrastructure available for enforcement under the NPA ordinance. 

The two-hour meeting saw discussions on issues such as financial position of PSBs, NPA resolution, review of all financial inclusion schemes, and cyber-security. 

NPAs have been eating into the net profits of PSBs. For instance, banks made a stable operating profit of Rs 1.5 lakh crore in 2016-17, but net profit was only Rs 574 crore due to various provisioning requirements, Jaitley said. 

After the merger of State Bank of India with its subsidiaries, the government is looking at the next phase of consolidation in the public sector bank space. 

“We are actively moving in that direction. I can’t give you further details as these are price-sensitive information. But you can take it that there is movement in that direction,” Jaitley said.

Government’s policy think tank Niti Aayog is learnt to be working on the consolidation road map for PSBs by studying their financial health, NPA position and geographical reach, and is likely to submit the report within a month. 

On the farm debt waiver issue, Jaitley said, “We have already made the position clear that states that want to go in for these kind of schemes will have to generate funds from their own resources. Beyond that, the central government has nothing more to say.”