Govt to consider more oversight panels for NPAs, says Jaitley

He said rate of rise in banks' NPAs slowed in March quarter; steel sector began showing improvement

Union Finance Minister Arun Jaitley said on Wednesday the government would consider setting up multiple oversight committees under the Reserve Bank of India (RBI) to examine the cases of non-performing assets (NPAs) referred by banks. 

According to an official release by the finance ministry, Jaitley also said several alternatives were being discussed on the issue of setting up state-backed bad banks.

Jaitley made these remarks at the meeting of the Consultative Committee on Finance on Wednesday morning.

The committee discussed ways to deal with the toxic assets worth ~9.5 lakh crore in the banking system. However, senior government officials in the meeting said that Jaitley was against using taxpayers’ money to deal with corporate defaults. “The finance minister is of the opinion that bad banks are not a good idea,” said an official.

“It was also discussed that we want to amend the Prevention of Corruption Act as soon as possible to give confidence to bankers and government officials that their commercially viable decisions will not be scrutinised by probing agencies,” the person said. “The RBI has made an Oversight Committee to look into the process of cases referred to it by the different banks. Seeing the response and its performance, the finance minister said that the government is considering a multiplication of such committees,” the finance ministry statement said.

Jaitley said the rate of the rise in banks’ NPAs had slowed in the March quarter and the steel sector had started showing improvement. The core problem of NPAs was with very large companies, though few in number, which were predominantly in the steel, power, infrastructure and textile sectors, Jaitley said at the meeting. 

He said some companies had expanded their capacity during the boom period from 2003 to 2008, but could not face the global financial crisis and the consequent slowdown. “The government is taking sector-specific measures to deal with the problem of NPAs, specifically in the resolution of large debts …,” Jaitley said.

The members of the consultative committee also gave suggestions on the matter. Some parliamentarians said that apart from recovery proceedings, criminal action must be taken against big, wilful defaulters and their photographs might also be published, according to the statement.