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Banks will need higher haircuts to resolve NPAs: UCO Bank

IANS  |  New Delhi 

Taking higher haircuts is the way forward for resolving the bad loans of banks, MD and CEO R.K. Takkar said on Wednesday.

"We may have to take some haircuts. The banks will be prepared for that and moving forward. I think that's the way things have to move. Most of these (non-performing assets) accounts will be having 40 per cent provisions, so the only issue that comes is for the banks to take higher haircuts," Takkar told BTVi in an interview.

The Reserve of India (RBI) has given banks a time frame of six months to resolve their bad loan cases, apart from the 12 identified by its Internal Advisory Committee, failing which the cases will have to be dealt with through the insolvency route.

"Banks will be examining each NPA case during the six months. It is also to put pressure on the promoters," Takkar said.

"It has to be done within six months. The only option left after that will be liquidation," he said.

The RBI on Tuesday identified for insolvency proceedings 12 accounts totaling 25 per cent of the non-performing assets (NPAs), or bad loans, of the banking system.

"The Internal Advisory Committee (IAC) noted that under the recommended criterion, 12 accounts totaling about 25 per cent of the current gross NPAs will qualify for immediate reference under IBC (Insolvency and Bankruptcy Code, 2016)," the Reserve of India said in a statement.

The IAC has been constituted under the Banking Regulation (Amendment) Ordinance, 2017, issued by the government last month, that allowed more power to the RBI to tackle the NPAs issue.

It has been empowered to issue directions to commercial banks to initiate insolvency proceedings for recovering bad loans.

"I think that was the main purpose of the ordinance. Giving the RBI the power to identify all bigger accounts. If some resolution can be found for these accounts, it will send the right message to the market and set thing going and take a call on the other accounts subsequently. It is good we are going for bigger accounts first," Takkar said.

--IANS

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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