Panel pill to fight bad loan

Mumbai: A panel of bankers has been formed to look into the feasibility of setting up an asset reconstruction company (ARC) or an asset management company (AMC) for the speedier resolution of bad loans plaguing PSU banks.

The idea of a panel came up at a meeting of PSU banks here on Friday and it has got support from the Union government.

The committee, which will be headed by Sunil Mehta, non-executive chairman of Punjab National Bank (PNB), will submit its report over the next two weeks.

Interim finance minister Piyush Goyal announced the panel after a meeting here with banks based in the western and southern regions of the country.

"A committee has been formed under the chairmanship of Sunil Mehta, which over the next two weeks will come out with their recommendations of a suggestion that was deliberated in great detail among bankers today (Friday) who believe that it may be worth considering to set up an ARC and or an AMC for the faster resolution of stressed assets," Goyal said.

He said the group will try to ascertain whether such an arrangement will be good for the banking system. If the idea is approved by the panel members, the modalities by which the ARC or AMC can be set up will be discussed.

The move comes at a time banks, particularly the PSU lenders, continue to report bad loans during the fourth quarter of 2017-18 as they were forced to recognise several loans as NPAs following a circular from the Reserve Bank of India.

Analysts said the key issue was whether the old idea of "Bad Bank" has made a comeback in the different avatar of AMC/ARC, this time around. Such a bank will buy the NPAs of PSU banks and either recover the money or sell the assets.

The Economic Survey of 2016-17 had suggested the creation of a centralised Public Sector Asset Rehabilitation Agency (PARA) that could take charge of the largest, most difficult cases.

The survey had said a government entity would ensure better management of bad assets and was capable of handling political pressures surrounding the sale of bad assets, unlike private ARCs which have not been successful in the country.