Ordinance on bad loans aims at maximum recovery for banks: SBI

Welcoming the ordinance on tackling bad loans, the State Bank of India on Monday said that it will help to maximise recovery for the banking system.

"This is a very welcome move, because it will hopefully help make decisions in a time-bound manner. The idea behind the resolution is to maximise recovery for the banking system," SBI MD Rajnish Kumar told BTVi in an interview.

Noting that the Joint Lenders' Forum framework has not been very effective, he said, "Decisions need to be taken quickly. Resolution needs to be faster, all options can be discussed. It cannot be forever that decisions are not taken."

He further added that under the current asset classification norm, it is not desirable that the banks simply wait for further deterioration of the asset quality without taking a decision. "The bankers do not have much choice but to decide one way or the other."

The government on May 5 issued an ordinance empowering the Reserve Bank of India (RBI) to direct banks to initiate insolvency process against the defaulters. The ordinance also empowered RBI to appoint an oversight committees to advise the banks on the bad loans.

"With the regulation of law, these oversight committees are appointed by RBI. In public sector banks, the decision-makers get some comfort from the authority that is independent," he said.

Kumar stated that in the current scenario, RBI is best placed to review the bad loans. "The question is that who else, if not RBI. If RBI does not have understanding of the issue, who else will have. In the current given situation, they are the best placed."

--IANS

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