First NPA ‘Info Bureau’ on anvil

First NPA ‘Info Bureau’ on anvil
EEB/AGENCIES

NEW DELHI, NOV 3: The government is likely to permit Housing Development Finance Corporation (HDFC), State Bank of India (SBI) and Dun & Bradstreet combine, to come up with the first “Information Bureau” in the country in a bid to check the rising bad loans.

The Information Bureau will provide personalised data on major corporate clients to banks for better credit risk management and arresting the piling non-performing assets (NPAs) now running at over Rs 58,000 crore.

“The modalities for the Information Bureau (by HDFC and SBI) have to be decided and talks were in progress,” banking secretary Devi Dayal told reporters on the sidelines of the National Seminar on Risk Management System.

Earlier, speaking at the seminar, Dayal said “in the light of high credit risk, there should be information bureaux to collect personalised information on corporate clients.” The proposed Information Bureaux would provide relevant corporate data to the banks for analysing the risk involved while extending credit to them.

He said it was neither recovery nor collateral that were to be treated as a paramount factor for credit risk management but projects should be appraised well for reducing the sticky assets to a large extent.

On the Bank Nationalisation Act, Dayal said the a bill to dilute government stake in public sector banks to 33 per cent would be introduced in the winter session of Parliament starting on November 20. “SBI would not form part of it,” he added.

The bill would be in line with the Narasimham Committee recommendations on financial sector reforms, which stated that the banks should be allowed to raise more capital from the markets for expanding their businesses and for that purpose dilute the government stake to 33 per cent.

Currently, banks including Punjab National Bank, Bank of Baroda, Canara Bank and Bank of India were planning to come up with initial public offers to raise fresh capital. Dayal said the government was considering to assist banks carry out the voluntary retirement scheme (VRS) smoothly by allowing necessary relaxations in the scheme for some banks.

The government has pushed for the VRS to reduce flab from the Indian banking sector by at least 80,000 employees. Accordingly, banks like SBI and PNB have completed the “Manpower Planning” exercise and announced a VRS package already.

The government is finalising a restructuring plan to revive the weak public sector banks. Addressing members of the parliamentary consultative committee members here on Wednesday, finance minister Yashwant Sinha said the boards of the weak banks would be reconstituted to induct more professionals.

The three weak banks are Indian Bank, Uco Bank and United Bank of India. The minister, however, ruled out closure of weak banks and stressed that “the government will do its utmost to revive and strengthen these banks.

The government was also proposing to set up a bank-specific Financial Restructuring Authority to deal with the problems of the weak banks on a continuous and long-term basis. Similarly, steps were under way to replace SICA and put in place appropriate bankruptcy laws with a view to further reforming the legal framework.Referring to the recent guidelines issued by the RBI for settlement of non-performing assets (NPAs) of Rs 5 crore and above, he said he would review the implementation of these guidelines with the CMDs of public sector banks.