President’s Desk

‘Create Structure to Enable Lenders to Tackle Bad Loan’


Sidhartha & Surojit Gupta

New Delhi: New Development Bank (NDB) president K V Kamath is no stranger to India having built the country’s largest private sector bank. He is more than familiar with the problem of bad debts, having grappled with it at the start of the millennium.

Currently in India for the NDB board meeting, Kamath believes a structure needs to be put in place to enable lenders to pursue resolution of the bad loan problem without having to fear about vigilance agencies or the federal auditor, CAG, questioning business decisions.

“We now need to get a resolution structure…somebody who can decide on what is doable and put a stamp on that…If that is done I think we will move ahead,“ he told TOI in an interview, adding that focus should be on getting the top cases where banks are stuck with bad loans.

“If you address probably 100 cases in front of you, most of the problem can be addressed and these 100 cases would basically mean putting them back to productive use. The interesting part is the provisioning for these is probably done. So, all you need is to work out in a way that the asset is back in use.“

While the Economic Survey had suggested PARA or a public sector asset restructuring agency, Kamath said a large amount of capital will be required to set up the body, which was suggested as an agency which could take a tough political call.

Apart from the stress in the banking system, Kamath also said the government should also push through public private partnership, which has slowed down due to the bad loan problem.

He also warned that an uptick in the economy may eat up “surplus power“. “We have got caught in this cycle several times. This time around, we appear to be having surplus power but a 1% upward tick in growth and we will be short of power. The good news is that there is enough of stuck assets. If you concentrate on just getting the stuck assets back to production your problem is solved for the next three to four years by which time you can think of fresh capacity .“