Finance Minister Arun Jaitley to first target Rs 2 lakh crore bank NPAs--DNA-30th May 2014
Non-performing assets (NPAs) of banks estimated at over Rs 2 lakh crore seem to be top on finance minister Arun Jaitley's agenda. Jaitley is weighing various options such as shifting the bank NPAs to asset reconstruction companies on a wider scale, and sweeping changes in the Debt Recovery Tribunal's (DRT) legislation, making the dispensation of cases time-bound.
Jaitley, after his meeting with the Department of Financial Services secretary Gurdial Singh Sandhu, also asked officials to expedite the new bank licences and ensure adequate capitalisation of the banks.
Post the meeting, Sandhu said, "Various measures to address the issue have been discussed. The first one being change of management of such NPA companies."
"Secondly, we need to make certain changes in the DRT legislation. Cases need to be dispensed in a time-bound manner. We need to see whether there could be multi-member DRTs," Sandhu said.
The total stressed assets of the public sector banks is Rs 2.09 lakh crore. The All India Bank Employees Association recently announced a list of public sector banks having a total of Rs 70,000 crore of NPAs.
In the meeting, Jaitley asked the mandarins to ensure that the banks remain fully capitalised and to also speed up the procedure for issue new bank licences.
The department of financial services would also create a road map for capitalisation of banks. "Basel III norms need to be adhered to before March 2019. We have to provide them capital. The options of raising money are government funding and the banks exiting from non-core businesses," Sandhu said.
The government is also in the process of forming the guidelines for banking licences.
The idea of differential banks such as bank for payments, wholesale bank for infrastructure funding, retail bank and local area banks is also being considered.
Jaitley also held separate deliberation with revenue secretary Rajiv Takru on goods and services tax. It is believed that Jaitley would call a meeting of the state finance ministers to carry on the stalled talks on the issues concerning GST.
Link DNA
I-T Dept. asked to share wealth details of defaulters with banks-The Hindu 30 May 2014
Information should be used only for recovery of loans’
In a step to help public sector banks to recover bad loans, the Finance Ministry has asked the Income Tax Department to share details of defaulters’ wealth tax returns with public sector banks (PSBs) if they ask for such information.
The Ministry, in a communication to Commissioners of Income Tax, said, “The CBDT ... clarifies that information on assets of loan defaulters to enable recovery of loans by PSBs from such defaulters is in public interest.’’
The top 30 non-performing assets (NPAs) of state-owned banks account for 40.2 per cent of their gross bad loans.
According to available data, NPAs of state-owned banks rose by 28.5 per cent to Rs.2.36 lakh crore in September last from Rs.1.83 lakh crore in March, 2013. It is expected to have grown further.
Reserve Bank of India Governor Raghuram Rajan had recently expressed concerns over the bad loans in banks.
The directions were issued in view of reluctance of the Income Tax Department, which comes under the Central Board of Direct Taxes (CBDT), to share information provided in wealth tax returns with banks despite repeated requests. However, the Finance Ministry said banks would be allowed to recover their dues from sale of assets of defaulters only after settlement of the claims of the tax department.
“In order to ensure that tax dues of the department against the defaulter (if any) are safeguarded, an undertaking be obtained from the PSB to obtain an NOC from jurisdictional CIT of the loan defaulter before appropriation of the surplus amount recovered from sale of immovable/movable asset of the defaulter, information in respect of which is shared, after adjustment of its loan dues,” it said.
The Finance Ministry further said the information provided by the Income Tax Department to banks should only be used for recovery of loans and should not be shared with any other agency.
Operation Clean-up--Hindu Business Line
State-owned banks have shown some progress in shedding NPAs, but they need to do much more
Finally, there seems to be some light at the end of the tunnel for banks weighed down by their large portfolios of non-performing assets (NPAs). Part of this has come about because of the economy bottoming out, leading to a reduction in fresh loan delinquencies. Public sector banks (PSBs) actually saw their total NPAs decline in the January-March quarter, after expanding sequentially by 6-10 per cent in the previous three quarters. Besides, they have started selling some of their bad loans to Asset Reconstruction Companies (ARCs). Such asset sales amounted to around ₹50,000 crore in 2013-14, against ₹12,000 crore in the preceding fiscal.
The ARCs were set up over a decade ago to help banks expedite loan recovery without the intervention of courts. But until last year, this route was hardly used as banks were reluctant to sell their NPA portfolios at the steep discounts demanded by the ARCs. But now the sheer weight of NPA pile-ups has forced banks to negotiate mutually acceptable solutions for selling their bad loans at higher prices in return for deferred payments. While this is welcome, PSBs have also turned more willing to explore other avenues to shed bad loans. This has happened especially since the Reserve Bank of India’s (RBI) diktat on early recognition of doubtful loans — even before the existing 90-day overdue norm for explicit NPA classification — coming into effect this April. The RBI has, moreover, granted banks some accounting leeway to recognise losses from asset sales to ARCs over a two-year period. This has been a big relief to most PSBs, who are yet to provide for half of the bad loans in their books.
But it may still be some time before PSB balance sheets are repaired substantially to enable them to resume large-scale lending, especially to long-gestation infrastructure projects that the current government sees as the key to drive the next investment and growth recovery. For this to happen, judicial interventions that cause delays in the ARC process need to be reduced. This will help both banks as well as the ARCs to quickly unlock value from the borrowers’ assets. Also, before they embark on their next lending cycle, banks need to address the many lacunae in their existing practices. The NPAs that have mounted during this downturn have brought to light PSBs’ flawed approach to consortium lending as well as lack of prudence in increasing exposures to select sectors and business groups. It has also cast doubts over their ability to conduct due diligence on long-term projects and assess the risks that could lead to delinquencies. In this context, reducing direct government control over PSBs, in line with the recommendations of the PJ Nayak committee and bringing in private sector or foreign partners with requisite expertise would improve both their project assessment and risk management systems. This will ensure the next boom will not result in an NPA build-up of the sort we saw at the end of the last one.
No comments:
Post a Comment