3 Min Read
NEW DELHI/MUMBAI (Reuters) - The Reserve Bank of India (RBI) is at an advanced stage of preparing a list of bad loans where resolution is required under the country's insolvency and bankruptcy rules, Finance Minister Arun Jaitley said on Monday.
Speaking after meeting bank chief executives, Jaitley also said the government was working on consolidating state-run banks, although Monday's meeting did not discuss the topic.
Last month, India tweaked its laws to help tackle a record $150 billion in troubled bank debt. The government has authorised the central bank to direct banks to initiate an insolvency resolution process in the case of a default under provisions of the bankruptcy code.
"The RBI is at a fairly advanced stage of preparing a list of those debtors where a resolution is required through the IBC (Insolvency and Bankruptcy Code) process and you'll shortly be hearing about it," Jaitley told reporters.
An RBI deputy governor, N.S. Vishwanathan, said last week the central bank has decided to focus on a few large stressed accounts and an internal advisory panel will guide which of those would be referred to the IBC.
Sectors such as iron and steel and power account for the biggest chunk of soured loans for India's banks. The bulk of the stressed assets are held by 21 lenders majority-owned by the government.
A jump in provisioning has caused to many of the state-run lenders to report losses. Their weak financials and loss of market share to private sector lenders has revived calls for a consolidation of state-run banking sector to create a smaller number of bigger and nimbler banks.
"I can tell you we are actively working in that direction," Jaitley said on Monday, declining to give details in what he said would be stock price-sensitive information.
State-run banks made a net profit of 5.74 billion rupees ($89.2 million) in the year ended March 31, Jaitley said.
The banks had reported a net loss of 179.93 billion rupees in the year which ended in March 2016, compared with a net profit of 378.23 billion rupees the previous financial year, according to government data.
($1 = 64.3550 Indian rupees)
Reporting by Rajesh Kumar Singh and Devidutta Tripathy; Additional reporting by Sankalp Phartiyal; Editing by Richard Borsuk