New Delhi: Emboldened by the Banking Regulation (Amendment) Ordinance, RBI is expected to put bad loans worth about Rs 8 lakh crore for resolution by March 2019, a move that could bring down the non-performing assets (NPAs) to acceptable level and significantly improve the financial health of banks as well, a study done by ASSOCHAM said. “So, it should be safe to assume that the NPAs mess would largely be resolved by the first quarter of financial year 2019-20.
This would be helped by a combination of several factors – turnaround in the economic cycle and some resolute steps by the government and the Reserve Bank of India to fix the issue,” ASSOCHAM study titled NPAs Resolution: Light at the end of tunnel by March 2019. Although entire NPAs could be put on the altar of IBC resolution mechanism, it has to be seen how much and how fast they actually goes out from the balance sheets of banks which at this point of time seem very stressed, it said. It is no secret that NPAs are a big drain on the financial health of banks especially public sector banks (PSBs).
For example, 27 PSBs collectively made an operating profit of Rs 1.5 lakh crore in 2016-17, but after allowing for the provisioning for bad loans, among others, net operating profit slipped to a paltry Rs 574 crore. If balance sheet numbers are anything to go by, it simply brings home the fact that banks have no capacity to do fresh corporate lending that is necessary for pushing subdued private sector investment, the study said. Releasing the report ASSOCHAM Secretary General D S Rawat said, “It is to be noted that 16-month Asset Quality Review (AQR) exercise that ended in March 2017 pulled out NPAs from the closet and after this deep surgery strong medicine was required to quickly heal the system.”
“So, somewhat bitter medicine came in the form of the Ordinance promulgated by the President in May. The government gave wide- ranging legislative powers to the Reserve Bank of India (RBI) to issue directions to lenders to initiate insolvency proceedings for the recovery of bad loans that have reached unacceptably high levels,” he said.
