Finance panel to take up NPAs issue next week

Parliament’s Standing Committee on Finance is all set to review of non-performing assets (NPAs) and the scams that have rocked the banking sector.

The panel, headed by veteran Congress MP Veerappa Moily, will also look into the performance of National Company Law Tribunal (NCLT), which is dealing with 640 cases for resolution under the Insolvency and Bankruptcy Code (IBC).

In 2016, the committee had tabled a report on the ‘Non-Performing Assets of Financial Institutions’.

Moily told

BusinessLine that in this round they plan to address the challenges faced by the banking sector. “We are meeting on 17 April (Tuesday) on the subject ‘Banking Sector in India-Issues, Challenges and the Way Forward’. Issues including NPAs, stressed assets in banks and financial institutions, and the recent scams in PNB will be discussed. We have asked the Finance Ministry to respond to the queries by members [of the panel],” Moily said.

‘What of the ₹5.5-lakh cr?’

The Corporate Affairs Secretary’s recent statement that of the ₹9.5-lakh crore NPAs, at least ₹4-lakh crore would be brought back to the system has also come under the panel’s radar. “What will happen to the rest of the money?” Moily asked.

He added that the panel will look into the post-IBC scenario too. “We need to see how strong the NCLT and other mechanisms are to deal with the issue of stressed assets,” he added.

Another panel member said in the panel alleged that the Centre had no plans to deal with the burgeoning NPAs. “How did the Finance Ministry come to the conclusion that out of ₹9.5-lakh crore of NPAs, only ₹4-lakh crore will be brought back? The total amount must be much more than what they project. There should be Parliamentary scrutiny on this. That is why we have decided to take it up though we submitted a report two years ago,” he said.

Enormous loss

Experts are also supporting the panel’s decision to review NPAs. “If the government is setting a target of around 40 per cent for NPA recovery, it amounts to a massive haircut for the public sector banks: of nearly ₹5 trillion. This would be an enormous loss for the public institutions... After all its people’s money,” said Left-wing economist Prasenjit Bose.

In 2016, the panel had noted that majority of the Corporate Debt Restructuring (CDR) cases have failed to achieve the desired objectives.

Expressing concern over reports of various agencies, which stated that banking system in the country may be heading for a crisis due to failed or stressed CDR cases, the panel said there should be a definite timeline of about six months to settle CDR cases, “as there are instances where discussions with stakeholders are dragging on for years to settle such cases.”