Need to wait for further details for NPA resolution: SBI

The government takes a crucial step in its battle against bad loans. The cabinet clears amendment to banking regulation act. Details will be revealed after the President's nod.

In an interview to CNBC-TV18, Rajnish Kumar, MD of State Bank of India spoke about his reading and expectations of banking sector in terms of non-performing asset (NPA) resolution measures.

"We have to wait for the details as they are not known but conjecture is about more powers to Reserve Bank of India (RBI), so they can provide more direction", he said.

The NPA problem has to be tackled at many level, he further added.

Cabinet's measure of preference will be given to the local steel manufacturers is a positive step and will be helpful to the industry.

Below is the verbatim transcript of the interview.

Latha: What have you made of yesterday’s announcement from the Finance Minister, what are you expecting?

A: We have to wait for the details. The details are not known but the conjecture that is coming in the media is about certain more powers to RBI so that they can provide more direction because they are the regulators and the responsibility for the stability of the banking and financial system rests with RBI.

So if there is any more powers required and if that is the intent of the ordinance then probably we have to wait and see, that is what could be there in the ordinance.

Latha: You are not privy to anything?

A: No, we are not.

Sonia: Do you think all of these measures that the government is taking is enough to solve the NPA issues or do you think more is needed at the moment?

A: No, looking at the problem, the problem has to be tackled at many levels. So one is that definitely an environment at the macro level is required and the decision like yesterday which was taken about the steel industry, for infrastructure, preference will be given to the local producers. So this type of measures at macro level can help the industry and government can take future steps.

Another is the fearless decision-making where in many accounts, all of us know that some haircuts are inevitable, the debt has to be brought down, so for that the fear of later on being questioned or your intent being questioned, that fear always lures the mind.

The third issue is that there are too many banks and too many decision-makers. How to bring them on a common platform and expedite the decision-making. So essentially these three-four major areas where work needs to be done so that the resolution can be found.

Latha: We were given to understand, it could be some of these options. I am not saying my sources are above board, these are more guesses, one that the RBI is empowered to appoint oversight committees which will look at the banks resolution cases and approve them, two it could be making public sector employees, bank employees immune or out of the gambit of the Prevention of Corruption Act because they essentially handled commercial decisions and three that RBI could be empowered to direct banks to either resolve NPLs or send it to the insolvency court, will any of these help?

A: All these three will help particularly what you mentioned about Prevention of Corruption Act, we do not know what is in the ordinance but if that happens that will be a welcome relief to all the decision-makers.