Business & Investment

Avoid window dressing of bad debts by parking NPA using ARC: Parliamentary Panel to Banks

The Parliamentary Treasury Standing Committee, led by BJP leader and former Finance Minister Jayant Sinha, said banks are using asset reconstruction companies (ARC) to park bad assets and do not rely on such practices. Warned.

The Commission also observed that the non-performing loan problem in the banking sector was “temporary” in nature and should not be treated as an excuse for the privatization of public sector banks (PSBs).

“ARC is a way to park a bank’s bad assets (NPA) as just a winddresser. Therefore, the Commission has decided not to abuse this policy in this way as it is not really useful. Recommended. The purpose of resolving NPA. ” A report on the country’s banking sector was submitted to Lok Sabha on Tuesday.

The Commission also urged regulators to revise the guidelines, noting that the Reserve Bank of India (RBI) revised its non-performing loan framework, resulting in an increase in such lending in 2017-18.

Read again: Formation of Indian Bad Bank

“The RBI framework for resolving stressed accounts led to a surge in non-performing loans in 2017-18, so non-performing loan provisioning cut into revenue and PSB capital, further emphasizing leverage issues. The Commission, at least in the short term, has a limited range of earnings improvement, and PSB’s existing high leverage has hampered lending and lending capacity, which in turn is in the outlook for growth in our economy. I’m concerned that it could have a negative impact. ”

“The Commission hopes that the RBI will review its regulatory guidelines while properly taking into account the need to improve banking and business in general scenarios,” he added.

The Commission also said it was pleased with the “coherent policy response by the government” in addressing the NPL problem in India’s banking sector.

“The Commission has been informed that the total NPA has decreased from Rs 8.96 in March 2018 to Rs 5.77 in December 2020. A record recovery of Rs 2.27 from March 2018 to March 2020. Was achieved. The net NPA decreased significantly from 7.97% in March 2018 to 2.32% in December 2020. ”

Read again: Government-sponsored “bad bank” with individual trusts for each distressed asset

Avoid window dressing of bad debts by parking NPA using ARC: Parliamentary Panel to Banks

https://www.businesstoday.in/industry/banks/story/avoid-window-dressing-bad-debt-by-parking-npas-with-arcs-parliament-panel-to-banks-303303-2021-08-04?utm_source=rssfeed Avoid window dressing of bad debts by parking NPA using ARC: Parliamentary Panel to Banks

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