Intermediate mechanism for NPAs on anvil

Worried over mounting bad loans, the Bank Board Bureau (BBB) is working out an “intermediate mechanism” to ensure early resolution of the problem and also to provide comfort to the bank management with regard to settlement of dues.

“We are putting in place an intermediate mechanism which will analyse some of the processes which would be triggered to settle the NPAs that the banks are carrying on their balance sheets,” Vinod Rai, chairman of BBB told reporters on the sidelines of an industry event.

That intermediate mechanism will provide a certain degree of comfort to the management of the bank — chief executive or the executive director — he said, adding there are two kind of issues, one is process of resolution, the other is the pricing at which the resolution takes place.

“Pricing is the commercial judgement of the institution. And I don’t think it would be fair to have an outside agency take that decision,” he said. When asked by when it would be in place, Rai said: “It’s all being thought out. We have not crystallised our thinking. But there will be an intermediate mechanism. It will give a lot of comfort to bank decision makers and it will be very credible.”

The entire thing will be rolled out in a fortnight, he said without giving much details of it. Asked if it will be under the Bureau, he said it will be outside BBB and would be in domain of banks.

Last week Rai had stressed that the bad loans situations was not alarming and said all public-sector banks have got their strategies in place to tackle the stressed asset woes.


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