'Ordinance to help adopt targeted approach for NPA resolution'

The changes in the banking laws will help in adopting a targeted approach to deal with NPAs or bad loans which are confined to only few large accounts and six specific sectors, Principal Economic Adviser Sanjeev Sanyal said today.
"This issue is concentrated in few accounts and relatively few sectors, so because it is concentrated you can take more targeted approach," he told reporters here.
The problem is limited to six sectors, he said, but did not elaborate.
Noting that the non-performing assets (NPAs) issue was festering for a long time, he said banking system was getting gridlocked but the mechanism of Oversight Committee (OC) will help expedite resolution.

"There is a potential here that the OC can use its powers for three things -- One, stop free-riding by lenders who didn't participate. Second, compliance after an agreement has been achieved.
"Third, once the oversight committee has put a stamp on a certain resolution it will then be able to get rid of the old problem which was that the bankers were afraid that there might be investigations and other things against them. This is not the case of either the government or the central bank trying to resolve each case," he said.

The whole thing will be done on commercial basis and OC stamp that due process has been followed will take away the fear of any future investigation, he said.

Compliance by the banks would be ensured by the Reserve Bank, he said, adding the government role ended with amendment and whole process will now be carried out in Mint Street.
He further said that the RBI already has a list of top defaulters and the process of resolution would start soon.
Toxic loans of public sector banks (PSBs) rose by over Rs 1 lakh crore to Rs 6.06 lakh crore during April-December of 2016-17, the bulk of which came from power, steel, road infrastructure and textile sectors.
Gross NPA of PSBs nearly doubled to Rs 5.02 lakh crore at the end of March 2016, up from Rs 2.67 lakh crore at the end of March 2015.

On the issue of hair cut, he said process will be worked out by the Reserve Bank through oversight committees.
"All of that is for the banks to decide under direction of oversight committees. The government will not have anything to do with that. The Reserve Bank is anyways not deciding, the oversight committees will," he said.