Bankers should refer stressed assets cases to the National Company Law Tribunal (NCLT) only if satisfactory resolution outside the Tribunal is not available, said Minister of State for Finance Anurag Singh Thakur.

Requesting bankers to try and resolve the stressed assets in right earnest, Thakur, in his keynote at the Indian Banks' Association’s 72nd annual general meeting, said they should not use the NCLT process for every case.

Bankers say stressed assets cases are being referred to NCLT in increasing numbers due to the fear that their decisions on resolution via other routes, including one-time settlement, could be questioned later. However, the downside of this tendency is that if an asset is not revived within the stipulated period under NCLT then it goes straight into liquidation.

Reiterating the assurances given earlier by the Prime Minister and Finance Minister to bankers that decisions (relating to credit and recovery) taken by them in good faith, with a sound business rationale, in the normal course of business will not face any witch hunt, Thakur said: “The government is standing with the banking industry.

“And no decision taken in good faith will be treated adversely by any agency in the future. Feel free and take decisions in the interest of the banks and the country.”

Funds flow

The Minister also urged the bankers to take decisions in a timely manner and ensure quick flow of funds. This can lead to an accelerated credit growth in the economy.

Referring to the government’s goal of making India a $5-trillion economy by 2024-25, Thakur emphasised that banks have the responsibility of being drivers of economic growth.

“The track record of the banking industry inspires confidence that it will successfully deliver and contribute to our nation’s growth and well being.

“For any economy to grow and prosper, there should be easy availability of funds. Over the last five years, the government recapitalised the PSBs with over ₹2 lakh crore. This has helped them immensely,” said Thakur.

Following the last tranche of recapitalisation and the increased flow of capital, the Minister expects the remaining four public sector banks (PSBs) to come out of the PCA framework. This will remove the lending restrictions on them. The PSBs that are under currently PCA include Central Bank of India, Indian Overseas Bank and United Bank of India.

Cheaper loans to MSMEs

Thakur expressed confidence that the recent step taken by the Reserve Bank of India, mandating banks to link their fresh loans to retail and micro and small enterprises (MSEs) to external benchmarks from October 1, will lead to cheaper funds for the borrowers.

“This will also reduce the cost of working capital loans for the industry. It is commendable that 14 PSBs have already come out with a repo rate linked product for home, vehicle and working capital loans.

“Only a fraction of the repo rate cut benefits has been passed on by banks to the borrowers (that is the companies). I urge the banking community to pass on the benefits of the rate cuts to the companies, which will lead to an increase in the consumption cycle, thereby leading to a revival in their investments,” said Thakur.

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