Arcs Wont Solve Problem Of Bad Loans, Saya Iba Chief

Indian Banks' Association (IBA) chairman Dalbir Singh today said forming asset reconstruction companies (ARCs) by public sector banks will neither reduce the non-performing assets nor will render any liquidity.

Alluding to one of the Narasimham Committee recommendations that sought setting up of ARCs for tackling the problem of NPAs, he said this mode of dealing with NPAs would not benefit the banks as delinquent assets will only be transferred to the ARC but they have to wait till such time as the company disposes of these sticky assets.

Singh, who is also the chairman and managing director of the Central Bank of India, said the creation of debt recovery tribunals (DRTs) led the banks to hive-off the sticky assets of various branches in a particular region to asset recovery cells falling within the jurisdiction of a particular DRT. This mode of recovery has resulted in the delinking of NPAs from the branches and the law officers at these cells could pay undivided attention to the recoveries.

 

With a view to effect faster recoveries, the government is seriously considering a proposal formulated by the IBA on foreclosure laws. The laws, once implemented, will allow the banks to bring the defaulter before the court of law.

Singh, who was speaking at a press meet organised by the Mumbai Marathi Patrakar Sangh, said, the recent VRS by his bank will help make savings of Rs 200 crore per annum. When asked whether the public banks will come out with a second round of VRS, he averred that they could possibly consider it once the impact of the first round was assessed.

Meanwhile Central Bank of India has reported a net profit of Rs 54 crore in the half year ended September 30, 2001, compared with Rs 46 crore during corresponding period of the the previous fiscal. "We have kicked-off a five-year revival plan during the beginning of this fiscal and are close to meeting our targets," CMD of Central Bank of India, Dalbir Singh, said.

To date, the bank has built up a deposit-base of Rs 42,800 crore compared with the target of Rs 43,000 crore for 2001-02. It has also brought down the net NPAs to 9.1 per cent compared with 10 per cent as on March 31, 2001.