The RBI?s proposal to offer incentives for quick recognition and resolution of stressed accounts has found support among bankers. They agree that dealing with stressed assets early would ensure that the level of NPAs in the system will go down.
?We already have the special mention account (SMA) category in the bank and what has now been proposed is a further stratification of SMA categories. If we deal with stressed loans early in the day, our non-performing loans will be smaller. What it will do is ensure there is early resolution,? said SBI chairperson Arundhati Bhattacharya.
If the final norms are drafted exactly like the discussion paper, lenders may have to provide more than double of what they currently do, in certain cases. Even then, bankers seem to be positive of the effects these norms will have.
?This would bring better credit discipline, especially in case of accounts where there are a large number of bankers are involved. Strict guidelines would help both lenders and bankers,? said VR Iyer, CMD, Bank of India.
The paper discussed the possibility of allowing PE firms and other entities to take over stressed accounts and turn them around, while also receiving bank funding for such buyouts. Similarly, RBI has also stated that it proposes to discuss better norms of asset reconstruction companies (ARCs) and even allowing them to trade in NPAs. ?We are talking to a number of ARCs and private equity firms. There is no question of not engaging these players,? SBI’s Bhattacharya said.
Though appreciative of the RBI’s moves, lenders also agree that these may not help in doing away with the NPA problem completely. ?There are some issues like the time frame for asset classification suggested in the guidelines, which we will take it up with the RBI through the Indian Banks’ Association,? said M Narendra, CMD, Indian Overseas Bank.
