 "New norms for ARCs soon: RBI")
“Over the next few days, we will be able to announce some measures on ARCs. I think the idea is broadly to ensure that financial assets are dealt with in a way to ensure the maximum value for the underlying real assets and to put the economy back on track in terms of growth. So, if there are distressed assets, then can we bring in new equity? If there is restructuring that is needed, then will the banks do that quickly? If there are assets to be sold, then can that be done speedily? Time, often, is the most important thing. The longer you wait, the more distressed the asset becomes,” said Raghuram Rajan, governor, RBI.
He added if one can put the assets back on track quickly, then the overall losses to the system could be significantly reduced.
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Even earlier in February, RBI had stressed on the early detection of non-performing assets (NPAs).
To prevent a pile-up of NPAs, the regulator has asked banks to segregate accounts on the date of repayment from the time they are 30 days, 60 days, and 90 days due.
Banks sell NPAs to ARCs when they feel that others can do the recovery job better and have made the provisions in their books according to the norms.
Even earlier RBI had emphasised the need to make the role of ARCs more crucial in the treatment of bad loans. “ARCs should be construed as a supportive system for stressed asset management with greater emphasis on asset reconstruction rather than asset stripping. Towards this end, sale of assets to ARCs at a stage when the assets have good chance of revival and fair amount of realisable value, for rehabilitation and reconstruction is encouraged,” the RBI had said in its circular dated January 30 on Framework for Revitalising Distressed Assets in the Economy
Finance Minister Arun Jaitley had revealed that NPAs of public sector banks have soared to Rs 25,809 crore for the financial year ended March 31. The total gross NPA ratio have gone up to 4.03 per cent in 2013- 14 from 3.42 per cent in 2012-13 and 2.94 per cent in 2011-12.
However, bankers believe that concerns on the NPA front continue but the worst is definitely far behind. Even Rajan said he was hopeful that the NPA problem would be diminished over a period of time.