The consolidation of more banks may begin from next fiscal as the priority today is to unlock the jammed lending system with the Non-Performing Assets (NPAs) sitting over balance sheets of banking institutions, Banks Board Bureau chief Vinod Rai said on Tuesday.
Rai said it has been decided to remove NPAs from banks balance sheets by this fiscal end. He said the lending activity in banks has got totally jammed because of stressed assets sitting on their balance sheets. “Capital has got locked and banks do not have enough capital to start the lending process. So our priority one today is to try to unravel or unknot the entire process where we bring about certain amount of resolution. We do one-time settlement. May be we remove some of the assets which are sitting on the balance sheets of banks,” he said while addressing Chief Vigilance Officers at Central Vigilance Commission.
Rai said ‘what we have decided ourselves is that from today till may be December 31, or may be on the outer side by March 31, the process of removing stress from balance sheets of those banks’ will end. "We have decided to put all our energy into that process. Trying to ensure that lending process starts again because hatever banks might be doing they are not sticking out to lending for infrastructure. Unless you lend for infrastructure, the constraints for the growth of economy will always be there.
“For the time being the priority is to start the lending process,” said the chief of BBB, that advises the Government on top-level appointments at public sector lenders and ways to address the bad loans problem among other issues. To a question over consolidation of banks, Rai said there are teams trying to work on it and it will be sorted out post April 1. He said “if you saddle the banking administration with consolidation, which is a huge exercise by itself, it will create a lot of confusion.”
“But at the same time there are teams outside the banks which are working and trying to see which are the best fits. But unfortunately, for public sector banks it is not purely on merit that consolidation will take place. You just can't make XYZ bank disappear let's say from Kolkata, the entire political establishment will be up in arms..