The insolvency and bankruptcy process has taken wing and a flurry of activity on debt resolution is under way through this route, Finance Minister Arun Jaitley said on Monday.
As many as 81 cases have been filed under the Insolvency and Bankruptcy Code (IBC) process, with 18 of them coming from financial creditors, mostly banks.
Moreover, the RBI is at a fairly advanced stage of preparing a list of debtors, whose cases require resolution through the IBC process, Jaitley told reporters after his annual review of the performance of Public Sector Banks (PSBs) on Monday.
Jaitley said he expects “precipitative action” to be taken following the recent ordinance on bad loans, and this could bolster recovery efforts of PSBs.
RBI Deputy Governor SS Mundra said an internal advisory committee had been constituted to help the central bank “identify accounts” that needed to be referred for the IBC process. “This committee will help frame the guidelines (on the) basis (of) which the accounts will be identified,” Mundra later told BusinessLine .
In early May, the Centre had come up with an ordinance, which was seen as the ultimate weapon to end the paralysis over bad loans. An important component of this ordinance was enhancing the size and scope of the oversight committee and identification of such accounts that can be quickly taken up under the IBC process. At last count, bad loans in the banking system had crossed ₹8-lakh crore, prompting the Centre to issue an ordinance to deal with the stressed assets in the system.
‘PSB performance creditable’ Commenting on the performance of PSBs during 2016-17, Jaitley said PSBs had made a stable operating profit of ₹1.5-lakh crore. However, after accounting for provisioning, including bad debts, the aggregate net profit stood at ₹574 crore.
Jaitley also said credit growth was a challenge.
“Banks are making their best efforts through the infrastructure that is available to them. The subdued growth is in part related to the demand in the economy and not related to banks’ performance alone,” he said in reply to a query on the tepid credit growth over the last two years.
On digitisation, Jaitley said the banking system had shown satisfactory progress. Besides the financial review of PSBs, Jaitley also looked into their performance with regard to financial inclusion schemes and schemes such as Stand Up India, cyber security and Mudra loans.
More consolidation? Although consolidation of banks was not on the agenda of Monday’s meeting, Jaitley noted that the government was actively working in this direction. “I can’t give you details as some of these are price-sensitive. You can take it that there is a movement in that direction,” Jaitley said.
Speculation is rife that the Centre may embark on further consolidation in the banking system later this year, after SBI’s associate banks recently merge with it.