FM Arun Jaitley, RBI Governor discuss bad loans

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NEW DELHI: Finance minister Arun Jaitley and senior government officials met the Reserve Bank of India governor and two deputy governors to take stock of stressed assets of state-run banks.

A senior finance ministry official said that various options to deal with stressed assets were discussed, including setting up a bad bank.

“Both the government and RBI are working jointly to resolve the issues and ensure quicker resolutions. We haven’t firmed up anything yet,“ the official said.

Another official said dealing with In FY16, banks made recoveries worth `39,986 crore.

The Economic Survey had suggested the creation of a state-owned asset reconstruction company, Public Sector Asset Rehabilitation Agency (PARA), to deal with the mounting bad loans that had stifled credit flow in the economy.

The survey had noted that private asset reconstruction companies (ARCs) had not been successful in resolving bad debts and that a professionally run central agency with government backing could overcome the coordination and political issues that have impeded progress in the past eight years.

The government had earlier explored the idea of setting up a Na tional Asset Management Company (NAMC) that could act as a nodal agency to deal with bad loans.

In March, finance minister Jaitley had said that although the government would consider the suggestion for a bad bank, it was not in favour of the bad loan situation being tackled solely through the budget.

“We do not want to get into a situation where the whole business of asset reconstruction for which we have just widened the policy, and we do not want a situation where eventually it will all converge to a government issue and then the whole thing will have to be supported only out of the budget and not otherwise,“ he had said. large defaulters had also been on the agenda.

“We discussed all issues pertaining to stressed assets, including large defaults and ways to support genuine promoters,“ the second official said.

The meeting was also attended by chief economic advisor Arvind Subramanian besides financial services secretary Anjuly Chib Duggal and RBI deputy governors SS Mundra and Viral Acharya.

A senior official from the corporate affairs ministry was also present.

Gross non-performing assets or bad loans of public sector banks (PSBs) were pegged at over `6 lakh crore at the end of December 2016.