ASSOCHAM for creation of Stressed Asset Funds for NPA resolution

Apex industry body ASSOCHAM suggested the creation of a Stressed Assets Fund (SAF) with active participation of the cash rich public sector firms to turn non-performing assets (NPAs) into performing assets.

The chamber extended full cooperation with the government and the Reserve Bank of India (RBI) in finding immediate and sustainable resolution of the non-performing assets of the public sector banks, expecting a pragmatic and practical approach by the lenders and regulators in the face of situations on the ground in different sectors of the economy, that remain under stress.

According to the chamber, an SAF can help in revival of the assets under high leverage. Once these assets are brought back to shape, the pay-backs to the SAF can take place.

Some of the cash rich public sector companies can be encouraged to participate either in the SAFs or take over some of the assets where the present promoter wants to exit. With the green shoots in several of the sectors, this could even be an opportunity for the government or special purpose vehicles to buy assets at much lower valuations.

Lauding the government's move to amend the Banking Regulation Act, along with enabling changes in other related laws, the chamber said while empowering the RBI to help the banks by way of oversight committees was a welcome move, more would be required.

"The key would be to have persons of high integrity on these oversight committees, which then should be given all out support from the government to help the lenders resolve the top NPA accounts within a time bound period. What is equally important is that the persons mandated with the task can rest assured that they would be no fear of vigilance bodies after decisions involving some losses for the sake of reviving the stresses assets are taken in good faith," said Sandeep Jajodia, President- ASSOCHAM.

Once the resolution mechanism worked out by the individual banks or Joint Lenders' Forum is approved by the RBI's oversees committees, the bank officials implementing the resolution should be given a free hand without any fear of future probes, so that viable commercial decisions are taken.

In cases where the stressed assets or NPAs can be turned back into healthy assets, the existing promoters should be extended adequate working capital for the purpose.

ASSOCHAM further urged the RBI to clear all the pending applications from foreign investors for setting up asset reconstruction companies in India, giving them a clear-cut framework for business of asset reconstruction.