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Two-pronged
strategy to tackle NPAs
Our Banking Bureau
15 November 2001
 Mumbai:
The
government, in consultation with the Indian
Banks Association, has formulated a two-pronged strategy to tackle
the problem non-performing-assets (NPAs).
According
to the strategy:
1) Public sector banks and financial institutions have been given
the liberty to take stringent action against big borrowers and
those classified as willful defaulters. Large willful defaulters
have been classified as those with loans above Rs 5 crore.
2) Small borrowers with loans up to Rs 25,000 will be dealt with
kindly and given the choice of not having to pay interest on their
borrowings and settle the principal amount instead.
Finance
Minister Yashwant Sinha announced this during a meeting with banks
and financial institution representatives early this week. NPAs of
public sector banks have risen to Rs 56,000 crore and large
borrowers, with loans above Rs 5 crore, account for almost Rs
20,000 crore out of the Rs 56,000-crore NPAs.
In the
first half of the current fiscal, bank NPAs increased by Rs 2,000
crore. Sinha said henceforth, the one-time settlement scheme,
initiated earlier by the RBI, will cease to exist and NPA
settlement would be left to individual banks to deal with, in
consultation with the respective boards.
Sinha
also said the government would consider finalising the modalities
of an asset reconstruction company (ARC) in the next two-to-three
weeks, which will help PSU banks
to clean up their balance-sheets.
 The
group on ARC would comprise representatives of the Reserve Bank of
India, the banking division of ministry of finance, State Bank of
India, Bank of Baroda, United Bank of India, Uco Bank and Indian
Bank. Sinha said banks have been asked to exchange information
between each other and follow up vigorously on legal suits.
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