Mumbai: Interim finance minister Piyush Goyal on Friday announced the formation of a committee that he said will come up with recommendations to set up a mechanism for the speedy resolution of stressed assets in the banking system.
“A committee under the chairmanship of Sunil Mehta, non-executive chairman of Punjab National Bank, which over next two weeks will come out with their recommendations over setting up of an asset reconstruction company and/or asset management company for faster resolution of stressed assets," he said.
Indian banks, already burdened by a near-record Rs9.5 trillion ($141 billion) of non-performing asset (NPAs) as of last year, reported a further rise in bad loans in the March quarter after regulator Reserve Bank of India (RBI) withdrew half a dozen loan-restructuring schemes and tightened some rules.
Goyal was in Mumbai meeting the heads of public sector banks from west and south zones to discuss ways to improve credit flow in a “risk mitigated manner and also help banks achieve global standards in terms of governance and banking process".
Banks are exploring a strategy to deal with accounts that face working capital constraints due to their exposure under prompt corrective action (PCA), he added.
Speaking at a press conference, Goyal also said that banks are looking to set up an oversight committee which will consist of retired judges, vigilance officials and external regulators to improve faster decision making in Indian banks.
On further capital infusion, Goyal said that it’s too early to assess the capital needs of all state-owned banks. However, he assured that the government stands committed to supporting the capital needs of these banks.
Goyal also made it clear that banks will have to take a final call on consolidation and maintained that the government is not going to micromanage what bankers should be doing.
Rajnish Kumar, chairman, State Bank of India who was present at the meeting said that the Indian banking system is currently fragmented. “The size of Indian banks compared to global banks is still small otherwise. Such a fragmented banking system is not able to support the growth aspirations of the country," he said.
On ICICI Bank, Goyal allayed concerns on corporate governance issues after allegations against its managing director on possible conflict of interest over loans made to the Videocon group.
“ICICI bank is a good bank. It has a robust process. There is no cause of concern for any of the stakeholders. As far as law is concerned, the law of the land will take its own course and the processes are going on both internally and externally which will come out with findings," he added.
Separately, Goyal also said that the government will fill up executive positions in PSU banks in the next 30 days.