The State Bank of India (SBI) stated on Wednesday that the RBI should incentivise banks to clean up bad loans. Incentives could be in the form of provisions or extension of the March 31st deadline to clears loans, it said.
SBI MD, Dinesh Kumar Khara, told in an interview that incentives from the Reserve Bank of India would help in the speedy resolution of bad loans. He also stated that in spite of the intervention of several professional agencies and consultants for managing the stressed assets, one month is a very short notice period to see clear-cut results.
Khara said, “The budget statement was clear that if required, the government would not hesitate to support the banks. They will find the means and ways to fund banks. I don’t expect problems on this count, provided banks have justified reason for additional capital.”
He also stated that bad banks need not pick up bad assets; instead they could convert the bad assets to profitable resources. He said that some assessments made by banks did not turn out the way they had expected. Khara also suggested that banks could segregate the bad assets and concentrate on justified lending.
Finance Minister Arun Jaitley, on the other hand, said that the money from taxpayers should not be used for paying corporate defaulters to banks, hence sidelining the suggestion to create a bad bank.