JLF regime's working not satisfactory, Anjuly Chib Duggal tells banks

The Department of Financial Services secretary added that unless bad loans were resolved, businesses were not going to be competitive

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The government on Thursday came down heavily on banks for the unsatisfactory working of the Joint Lenders Forum (JLF) mechanism, leading to delays in the resolution of stressed loans.

There was a need to speed up the process of finding solutions under JLF and without it, businesses won’t be competitive, said Anjuly Chib Duggal, secretary, department of financial services, in her address at an event of the Indian Banks’ Association. “Our ability to cope with the changes that are taking place is very closely linked to our ability to resolve assets particularly in consortium arrangements.”

JLF came into being in April 2014 as part of steps for early recognition and resolution of stressed loans. It replaced the corporate debt restructuring (CDR) mechanism.

“We have the (JLF) mechanism and somewhere it seems to be a cold feet mechanism because it doesn't seem to be working the way it ought to,” Duggal said, adding that unless one found a way to resolve bad loans, “we are not going to be competitive as we go along”.

“There has to be an understanding of what holds you back and thereafter a way to manage that. All of us are managers, we know how to manage risks,” she said. There were ways of getting around the risks and there were ways of resolving these assets, she said, adding the longer the problem continued, the bigger the risk.

Describing the domestic banking system as “a very happening sector”, Duggal said “since universal bank licences are on-tap now, we could look at further loosening of the window for starting small finance banks and payments banks”.

On financial inclusion, she said, “There is a massive financial inclusion drive. We are not only looking at outreach programme of banks, but also pulling in a number of existing institutions, there is a massive financial inclusion drive. The government is not only looking at outreach programme of banks but also we are also looking at pulling in a number of existing institutions.”