Arun Jaitley, RBI officials to meet tomorrow over bad loans

Arun Jaitley, RBI officials will meet on Friday to address the issue of bad loans or NPAs in the banking sector, the meeting will discuss ways of resolution the issue urgently


A file photo of finance minister Arun Jaitley. Photo: Mint
A file photo of finance minister Arun Jaitley. Photo: Mint

New Delhi: Finance minister Arun Jaitley will chair a high-level meeting with Reserve Bank officials on Friday to address the issue of non-performing assets in the banking sector.

The meeting, which will also be attended by financial services secretary Anjuly Chib Duggal, will discuss ways of resolution the issue of bad loans urgently, people familiar with the matter said.

While chief economic advisor Arvind Subramanian had suggested setting up of a bad bank to deal with the problem of non-performing loans, Reserve Bank deputy governor Viral Acharya had floated the twin concept of Private Asset Management Company (PAMC) and National Asset Management Company (NAMC) for resolution of stressed assets.

As on 30 September 2016, gross NPAs of public sector banks rose to Rs6.3 lakh crore as against Rs5.5 lakh crore at the end of the June quarter. This works out to an increase of Rs79,977 crore on a quarter on quarter basis.

Last month, Subramanian had said the idea of setting up a state-owned asset reconstruction company (ARC) or bad bank to deal with mounting NPAs is gaining traction and needs to be created quickly.

The PAMC plan, as suggested by Acharya, could be for sectors such as metals, construction, telecom, and textiles, where the assets will have economic value in the short run.

As per the plan, the banking sector may be asked to restructure about 50 large stressed exposures in these sectors by 31 December 2017. The NAMC plan could be viable for sectors where the problem is not just of excess capacity but of economically unviable assets in the near term.

More From Livemint