New Delhi, July 16: The Banking Regulation (Amendment) Ordinance, promulgated by Centre in the previous Parliament session, emboldens the Reserve Bank of India to push for resolution of bad loans, opines a recent study conducted by the Associated Chambers of Commerce and Industry of India (Assocham). The research work undertaken by the commercial conglomerate says the RBI would succeed in resolving non-performing assets (NPAs) to the tune of Rs 8 lakh crore by the first quarter of financial year 2019-20.

The Assocham study – titled  ‘NPAs Resolution: Light at the end of tunnel by March 2019’ – opines that the central bank would initiate its dedicated push towards resolving the NPA crisis by March 2019. As per the report, RBI would succeed in largely fixing the NPA crisis due to a range of factors, including a potential turnaround in the economic cycle, along with a number of resolute steps to be taken by Centre.

“So, it should be safe to assume that the non-performing assets mess would largely be resolved by the first quarter of financial year 2019-20,” the Assocham study stated. ALSO READ: Small, medium firms will be more competitive with GST: Assocham

The NPAs, collectively valuing over Rs 10 lakh crore till March 2017, are considered to be a major roadblock towards increasing the investment in private sector. The bad loans have considerably weakened the strength of public sector banks (PSBs).

According to a PTI report, 27 PSBs made a collective operating profit of Rs 1.5 lakh crore. However, after provisioning the amount constituted by bad loans in their balance sheets, the net profit slipped to Rs 574 crore.

Assocham general secretary D S Rawat, while releasing the findings of the study conducted by the group, said significant efforts have been initiated to target the NPAs. The 16-month Asset Quality Review (AQR) exercise which ended in March 2017, he noted, has unearthed the NPAs and provided the opportunity before the government and RBI to resolve them.

Rawat further stated that the Banking Regulation (Amendment) Ordinance passed in May 2017 2017 provides the operational space to the RBI to crackdown on wilful defaulters and others who are causing massive financial strains to the banks.

Describing the ordinance as “bitter medicine”, he said, “The government gave wide-ranging legislative powers to the Reserve Bank of India (RBI) to issue directions to lenders to initiate insolvency proceedings for the recovery of bad loans that have reached unacceptably high levels.”

Prior to the passage of the ordinance, banks were reluctant to pursue NPA cases, fearing the 3Cs – CBI, CAG and CVC – in case of resolving NPAs through settlement schemes, or selling off bad loans to asset reconstruction companies. After the ordinance came into effect, the RBI identified 12 accounts with outstanding loans of more than Rs 5,00 crores. They collectively account for Rs 2 lakh crore, or roughly 20 per cent of total NPAs. The process has been initiated to reach a conclusion under the Insolvency and Bankruptcy Code (IBC) resolution mechanism.