New Delhi: Reserve Bank on Thursday made a case for developing better strategies to deal with the problem of bad loans as hiding them would aggravate the situation for the banks as well as borrowers.
"An account becoming NPA is not a sin. The time has come that it would be a better strategy that if there is a weakness in the account...Rather than postponing, hiding the problem either on the part of banks or borrowers, it is important that the bank recognises NPA then extend a helping hand (to borrowers)," RBI Deputy Governor S S Mundra told reporters here.
Stressing that there is no regulation in the world that prohibits "rehabilitation" of NPAs, he said, "if exposure is too big, bank is in a weak position. If exposure is small then the borrower is at weak position. In either of the situation one of the parties will be in a weak position.
"...Once you declare an NPA then the realities are known and both the parties can sit across the table and workout a support plan which is more realistic and which is likely to succeed."
As of December 2014, gross NPAs of PSU banks were at Rs 2,60,531 crore or 5.6 percent of the total advances.
The top 30 defaulters are sitting on bad loans of Rs 95,122 crore, which is more than one-third of the entire NPAs of public sector banks. It amounts to 36.50 percent.
While NPAs are a matter of concern, they need to be dealt with, Mundra said, adding that a number of measures are being taken to contain it.
"Dealing with NPAs in a growth environment becomes easier than dealing with them in an environment which is either stagnant or decelerating," he said.
Mundra further said that there is a need to do away with the credit guarantee scheme.
"Guarantee scheme, enhancing the limit, I would rather say credit guarantee schemes itself is something which will not run forever," he said.
Gradually it has to be done away with, he said.
On the MSME sector, Mundra said different kind of architecture is required for addressing the credit requirement of the sector.
"Operationalisation of Small Finance Bank would be a step in that direction. Such banks would be able to provide focussed approach towards this sector," he said.
