Goyal announces panel to set up Asset Reconstruction Co
Mumbai: Acting Finance Minister Piyush Goyal on Friday said that a committee will come out with its recommendations on setting up an asset reconstruction or an asset management company for faster resolution of bad loans. Goyal announced this after a meeting with public sector banks from western and southern region at State Bank of India's headquarters here on Friday.
"A committee has been formed, which over the next two weeks will come out with their recommendations to set up an asset reconstruction company (ARC) and/or an asset management company (AMC) for faster resolution of stressed assets," Goyal told reporters here today. The committee will be headed by Punjab National Bank's non executive Chairman Sunil Mehta.
The finance minister said the committee will consider whether such an arrangement will be good for the banking system and, if any such suggestion is advisable, it will also consider the modalities by which such an ARC and/or and AMC should be set up. Asked about the funding for the ARC and/or AMC, Goyal said it was too early to go to that level.
"We will have to wait till the committee has discussed with all the bankers and come up with their recommendations, whether we should look at this as an option, and what should be the structure or modalities of this proposal," he said.
The finance ministry officials and the state-run banks on Friday discussed a host of issues related to the banking sector, including improving the credit flow, while mitigating the risks associated with that, to further strengthen the growing economy and methods to achieve global standards for the country's banks.
"All the bankers are now looking to set up such a mechanism which will enable a faster resolution of the stressed accounts in a very transparent and speedy manner. They will put up with their boards for necessary considerations," the finance minister added.
A proposal on having an oversight committee, comprising of retired judges, vigilance officers, regulators and external experts, to help faster decision making in the banking system was also discussed.
Banks also decided to come together and take faster decision to resolve issues related to credit flows to MSME sector, exporters and other small and medium borrowers, Goyal said.
Lenders discussed on a process to ensure credit flow to good borrowers or good accounts where some of the banks that are under Prompt Corrective Action framework of RBI are also the part of consortium, do not face any difficulty in meeting their working capital needs.
The RBI has put 11 banks, including Allahabad Bank, United Bank of India, Corporation Bank and IDBI Bank, among others, under PCA framework. Goyal said many suggestions to strengthen the governance process and to improve the performance of PSBs were discussed today.
"The government, the owner of 21 PSBs, stands committed to support each and everyone of these banks. We believe that these banks have a very important role to play in the economic and social development of the country," the minister said.
The government will support to strengthen the operations of PSBs and to protect the interest of depositors, customers and all the stakeholders, including the employees of these banks, he added.