RBI internal advisory panel to soon address stressed assets problem

To tackle the problem of stressed assets in the banking sector, the Reserve Bank of India will shortly convene a meeting of its internal advisory committee, which will focus on resolution of a few large accounts, said NS Vishwanathan, Deputy Governor.

“We have decided to focus on a few large stressed accounts…and accordingly a set of accounts have been identified based on objective criteria,” he said.

The Deputy Governor said the central bank held a series of meetings with the stakeholders — banks, rating agencies, asset reconstruction companies, private equity firms and investors — and the required modifications to the restructuring guidelines are in the works and the feedback received from these stakeholders are being built into the final guidelines.

“Overall, the RBI has a strategy to deal with the resolution of the large assets and we are working in a calculated manner and we hope to see some resolutions coming through,” said Vishwanathan.

Governor Urjit Patel observed that as the government and the RBI embark on resolving the twin debt hangover problems — over-leveraged corporate sector and stressed banking sector — the central bank felt that more targeted interventions that can unfreeze credit to help the stress-free but recently slowing sectors of the economy borrow at better terms are likely to work better.

Viral Acharya, Deputy Governor, observed that the accommodative policy of 2015 and 2016 failed to revive investment as it did not get fully transmitted by the stressed banks to the indebted sectors.

“The RBI, in partnership, with the government has embarked on resolving this stress in a decisive manner.

“In the meantime, what is likely to work better than interest rate policy in responding to growth challenges is the targeted intervention to create greater lending capacity for the healthier sectors of the economy that have recently slowed down,” he explained.

According to ICRA, asset quality woes of the banking sector are likely to continue this fiscal (FY18) even as fresh non-performing asset (NPA) generation rate continues to show signs of moderation, said the credit rating agency in a report.

The agency sees advances under strategic debt restructuring (SDR) to remain a risk to the asset quality in FY18.

ICRA has projected gross non-performing assets (GNPAs) to increase to ₹7.5-7.7 lakh crore (9.7-10 per cent) by the end of FY17 and to ₹8.2-8.5 lakh crore (9.9-10.3 per cent) by the end of FY18 with upside risks in case slower resolution of SDR accounts leads to higher slippages.

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