Lenders saddled with large stressed accounts began discussions with the Reserve Bank of India (RBI) on the resolution process.
A senior banker said preliminary discussions were part of the RBI’s interaction with stakeholders for resolution of big stressed accounts.
While there is a sense of urgency, but it’s too early to set timelines for the resolution. Banks
have flagged two aspects. One is about sector-specific strategy as problems and issues are unique. The focus is on steel, power and construction sectors. Second aspect is absorbing haircuts for restructured cases. Most public sector banks, which hold most of the bad loans, are reeling under losses. The haircuts would have to be spread over many quarters, another banker pointed out. Besides banks, the RBI is expected to hold a series of interaction with rating agencies, insolvency professionals and advisory firms.
The RBI is expected to rope in rating agencies to assess viability of debt, crystalise sustainable debt and recommend haircut lenders need to take in restructuring package for stressed assets.
The meeting was attended by heads of ICICI Bank, IDBI Bank, Axis Bank, HDFC Bank, Standard Chartered Bank and Canara Bank. Senior officials from SBI and Bank of Baroda were also present in the meeting held at the RBI.
“The focus of the meeting was on resolution of stressed loans. The RBI sought our views and suggestions to tackle the bad loan problem. This was in continuation of our past interactions with them (RBI),” a bank official said.