A committee of bankers led by Punjab National Bank chairman Sunil Mehta has proposed that a national asset management company be set up to take over bad loans from banks, two people in the know confirmed.
The Mehta committee comprised of representatives of all major banks, including State Bank of India.
According to an Indian Banks’ Association official, who spoke on conditions of anonymity, bankers felt that there is a need to take the function of NPA management out of the banks so they may focus on lending and growing their balance sheets. Transferring NPA management to a specialised entity would help aggregate the accounts and streamline decision making, said this official.
The plan to set up a national ARC over and above existing private ARCs and stressed asset funds comes against the backdrop of a pile of bad loans which continues to grow. As on March 31, 2018, bad loans across listed banks stood at over Rs 10 lakh crore. This could rise further over the coming quarters, cautioned the Reserve Bank of India in its Financial Stability Report released last week. The gross NPA ratio of scheduled commercial banks could rise to 12.2 percent by March 2019 from 11.6 percent in March 2018, said the RBI.
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