RBI Guv indicates that Banks need to clean up their non-performing assets
Updated: Dec 08, 2015 02:51:09pm
New Delhi, Dec 8 (KNN) Banks need to take immediate measures like sale of non-performing assets (NPA) to asset reconstruction companies to clean up their balance sheets and be in a position to grow, RBI Governor, Raghuram Rajan recently said.
While addressing a tele press conference, recently, Rajan commented on the growing non-performing assets on the books of the Banks.
While banks are shouting from roof tops about the growing share of bad loans in their total advances, precious little are being done to identify and address incipient sickness and revival of the sick enterprises. As per RBI guidelines, taking up restructuring of a non-performing asset removes most of the blocked amount from the balance sheet of the Bank. However, Indian banks are quite reluctant to take up early reconstruction.
Globally, reconstructions of sick assets are carried out by specialised agencies called Asset Reconstruction Companies (ARCs), whom the Banks sell their NPAs. In India also licences have been given by RBI for ARCs to operate. However, the prices at which assets are sold to ARCs are of concern to the Banks.
Commenting on the issue raised by a correspondent, Governor Rajan mentioned, “This is a problem around the world. Banks are reluctant to sell at the prices that come; companies that deal with distress are willing to buy. And so there is always a wedge between them, at some point they both come to an agreement and assets sold and typically these assets are sold at prices that are lower than what the banks would like to have”.
Essence of the matter is Banks cannot continue crying over the growing non -performing assets, which are basically effects of the economic cycle and get illogically restrictive on sanctioning fresh loans particularly to MSMEs, which again, globally, show the highest growth and death rates.
Commenting on the various measures taken by RBI on cleaning the non–performing assets of the Banks, RBI Governor said,”Now, we are in dialogue with the banks on a number of issues including the assets on their balance sheet and we are talking to them about what is being done... We have given a number of facilities to the banks to improve their asset quality, we are very concerned and we insist that they be used in the right way and … clean up the balance sheets in a significant way so that banks will be in a position to grow and lend going forward….”
How much of the above advices go home to the Banks to restructure and revive the sick companies are to be seen. (KNN/ DB)
While addressing a tele press conference, recently, Rajan commented on the growing non-performing assets on the books of the Banks.
While banks are shouting from roof tops about the growing share of bad loans in their total advances, precious little are being done to identify and address incipient sickness and revival of the sick enterprises. As per RBI guidelines, taking up restructuring of a non-performing asset removes most of the blocked amount from the balance sheet of the Bank. However, Indian banks are quite reluctant to take up early reconstruction.
Globally, reconstructions of sick assets are carried out by specialised agencies called Asset Reconstruction Companies (ARCs), whom the Banks sell their NPAs. In India also licences have been given by RBI for ARCs to operate. However, the prices at which assets are sold to ARCs are of concern to the Banks.
Commenting on the issue raised by a correspondent, Governor Rajan mentioned, “This is a problem around the world. Banks are reluctant to sell at the prices that come; companies that deal with distress are willing to buy. And so there is always a wedge between them, at some point they both come to an agreement and assets sold and typically these assets are sold at prices that are lower than what the banks would like to have”.
Essence of the matter is Banks cannot continue crying over the growing non -performing assets, which are basically effects of the economic cycle and get illogically restrictive on sanctioning fresh loans particularly to MSMEs, which again, globally, show the highest growth and death rates.
Commenting on the various measures taken by RBI on cleaning the non–performing assets of the Banks, RBI Governor said,”Now, we are in dialogue with the banks on a number of issues including the assets on their balance sheet and we are talking to them about what is being done... We have given a number of facilities to the banks to improve their asset quality, we are very concerned and we insist that they be used in the right way and … clean up the balance sheets in a significant way so that banks will be in a position to grow and lend going forward….”
How much of the above advices go home to the Banks to restructure and revive the sick companies are to be seen. (KNN/ DB)
Loading...
