Centre identifies 50 large NPAs for resolution under new ordinance
The government has identified 50 large loans to companies where the resolution to the debt crisis will be initiated. The Reserve Bank of India (RBI) will handhold banks to resolve the hurdles to repayment of debt, under the new NPA (non-performing assets) ordinance.
Top banking sources said case-to-case solutions would be sought in each company that would involve a longer repayment period to the company. Interest waivers by bankers will be part of the corporate bailout which is now broadly called NPA resolution.
Through the NPA ordinance that got the President’s nod, the government has empowered the regulator for resolution and appointment of committees to advise banks for stressed asset resolution. RBI will be empowered to intervene in specific cases of non-performing assets, give solutions and to bring them to a conclusion.
According to top bankers, a longer repayment schedule, sharper haircuts and additional funding may be some of the redressal mechanisms envisaged. This may involve more relaxed terms under the corporate debt restructuring and also under the strategic debt restructuring mechanism.
About 16.6% of loans to companies – or about 8.4% of the GDP – had been declared non-performing, according to a Credit Suisse report.
At the heart of the NPA crisis in India …read more
