SBI chief minces no words, says NPAs not a crime
In a bold statement, State Bank of India chief Arundhati Bhattacharya (in pic) on Tuesday said NPAs shouldn’t be treated as a crime as failures are normal for entrepreneurs.
“In India, NPA (non-performing asset) is treated as criminal, which it should not be. There is no permission for failures. Permission to fail is not given by the society. But failures will take place in case of entrepreneurs and entrepreneurship,” she said at a FICCI-organised banking conclave here. Raising a fundamental point, the chief of SBI, which is in the process of making NPA resolutions of large corporate accounts, said that loans were given at a time when the GDP growth had been hovering at 8.5 per cent and it was not expected that the accounts would turn bad. “But the GDP growth had fallen to four per cent which resulted in piling up of huge NPAs in the banking sector”, she said. She however, pointed out that these accounts were five per cent of the whole lot.
Known for not mincing works, Bhattacharya on two earlier occasions had said that banks needed some more clarity and dispensations to resolve the stressed assets problem.
She had also said that banks should be allowed to amortise losses on account of haircuts they would have to take while resolving a bad asset. “If in case we need deeper haircuts, then can they be spread over a few quarters? In case we need certain types of instruments or conversion then for conversion can Sebi extend what they have allowed in SDR for these conversions as well?” Bhattacharya had said.
On Tuesday she said, “The banking sector has, in one voice, asked for the Bankruptcy Code. So, we have to understand that we are a maturing economy, more and more we are evolving. As the country matures and evolves, it is necessary to have a judicial framework for orderly resolutions of assets. We cannot have makeshift structures that we were having earlier. So, we have been asking for a bankruptcy law and that has come.”
Bhattacharya said, “Now, the reason why we have not been rushing towards this is because with the law also you need to set up the ecosystem. First of all the (NCLT) bench has to be created, people have to be deputed on the bench, next you need to create an information utility, which has still not come. The information utility will tell the court that is the amount is due to a particular client and what are the securities available, this will create one time information for the court so that it does not have to go for place to place in order to determine what is the indebtedness. The third thing what is required is the resolution professionals, now these professionals needed to pass an examination and need to be registered with the NCLT.”
Ritwik Mukherjee