Deal with NPAs in flexible, pragmatic way: ASSOCHAM

Reviewing the state of economy, ASSOCHAM's Managing Committee, the top most organ of the apex chamber, has most urgently and strongly impressed upon the government and the RBI to take a pragmatic approach while resolving the complex issue of non-performing assets (NPAs) of the banks so that the same can be nursed back to health and the biggest hurdle to growth is removed.

It also expressed concern that the RBI, in its credit policy review, has missed yet another opportunity to lower the policy interest rates and help revive the industrial and overall economic growth.

The national wealth is not segregated into private sector or public sector resources. Whatever the circumstances, most of which beyond the control of the promoters, might have been, all out efforts must be made to resurrect the stressed or non-performing assets. It will be only when a realistic assessment of the state of the stressed or NP assets is done and commercial decisions are taken by the banks or other intermediaries without fear of being haunted that the gigantic problem could be resolved," the ASSOCHAM said, airing the collective views of its Managing Committee comprising country's top industrial houses, professional bodies and organisations representing Small and Medium Enterprises (SMEs).

The ASSOCHAM President Mr Sandeep Jajodia said, the terms of different schemes for resolution of the NPAs should be flexible and liberal enough to be accommodative, rather than being rigid. Once an account is turned into NPAs, the avenues for working capital are choked which hastens the curtains on the enterprise. Thus, whatever chances are there for survival and revival of a stressed enterprise or a project, are gone once the working capital requirements are not met".

He said there are several incomplete projects, especially in the real estate sector, where the developers have run out of cash at a stage where the projects are almost near completion. "With little more cash, the projects can be completed and handed over to those who have booked the same; it could be win : win for all the stakeholders: families or entities which booked the flats or commercial space, developers and the banks. But the banks need to be supportive and the government must encourage them".

He also said, for converting standard account into an NPA, the 90 - day limit for non-payment of interest or principal should not be treated sacrosanct. Because, the moment an account becomes an NPA, all finance channels are chocked". Besides, the NPA resolution would also lead to cleaning up of the bank balance sheets. The RBI itself has underscored the need for revival of the banks' health and uptick in the private sector investment.

The Managing Committee also said that as indicated by the latest data of GDP for the fourth quarter of the previous fiscal, the NPAs and the lack of private sector investment are the biggest road blocks for the economic growth. Unless we bring a sustainable growth of at least 8-9 per cent across the spectrum, we will not be able to generate jobs; so the stakes are high.

Besides, the interest rates need to come down further with inflation at the retail level staying below three per cent. Moreover, full transmission of the policy rates should be ensured. "While the bulk of the deposits have been mobilised by the banks at the CASA (Current Account Saving Account) of 3-4 per cent, most of the borrowers are charged a double digit and plus rates. Such a large gap cannot be justified and are a big drain on the balance sheets which are under heavy leverage".

The top policy making body of the chamber also took note of the July 1 roll-out of the Goods and Services Tax. "While, the GST would no doubt be a game-changer for the Indian economy over a medium and long term, the teething troubles cannot be ruled out. The tax authorities have so far been quite supportive and we hope that even after July 1 a friendly approach towards the tax-payers would be followed with a common objective of making GST a success. The unintentional lapses should be dealt with in a friendly manner rather than in an adversarial way".

The chamber also expressed optimism that the Monsoon would be normal this year as well, and the agriculture would remain a major trigger for growth. "However, farmers should be equally helped for an overall development of the economy". The policy and fiscal support along with active involvement of the state governments would go a long way in improving the lot of the farmers, the chamber President said.

He also said a close watch needs to be kept on the unfolding and somewhat uncertain geo-political situations in the Middle East, while new situation in the US should be met with new solutions. At the same time, India must also be pro-active in dealing with the post-Brexit scenario both with the United Kingdom and the European Union.

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