In what should be music to the ears of bankers, Banks Board Bureau (BBB) Chairman Vinod Rai has said that in the next fortnight the Board will put in place a new “intermediate mechanism” that will provide cover to bank chiefs on their bad-loan resolution decisions.

The bankers, who are currently wary of accepting one-time settlements from promoters due to the Indian system’s venerable 3Cs (CBI, CVC, and CAG, who can question their decisions even a few years later), will be protected by this ‘intermediate mechanism’.

The main purpose of this mechanism is to ensure that three years down the line the bank chiefs are not questioned over their resolution decisions by any external agency, Rai said at the Confederation of Indian Industry-organised 5th Banking and Finance Summit, on Friday.

Later, Rai told newspersons that the intermediate mechanism will be outside the BBB and form part of each bank. The modalities on who would be forming part of it are “still being thought through,” he added.

He also said that the mechanism would only focus on the “processes” undertaken in resolving NPAs (non-performing assets) and not the pricing decisions involved.

The pricing part of the resolution would still be a commercial decision vested with the bank, Rai said. He also brushed aside comments in certain quarters that bankers suffer from a “fear psychosis” in making lending decisions. This is a bogey and there is no “fear psychosis” among bankers, he asserted.

As regards joint lending and the regulatory aspects around it, Rai said that the Reserve Bank of India was working on more guidelines.

He expressed hope that the BBB’s measures would help clean up the bad loans in banks’ balance sheets.

“The roadmap for our actions will be ready by June 15,” he said.

Currently, the priority of the BBB is to fill vacancies and look at providing comfort to bank chiefs on their NPA-resolution decisions. Going forward, the Board is also likely to look at issues such as consolidation of banks.

Call to professionals Rai urged experts from various professions to come forward and offer their services on the boards of the banks.

He promised a paradigm shift so as to create an ecosystem for emergence of large, strong and professionally-run financial institutions and banks.

The BBB Chairman also called for transparency, ethics and probity in financial sector-related businesses in the backdrop of the “loss of trust” between government and business and between financial institutions and business.

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