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PSU banks need to be empowered to cut losses and get rid of NPAs without 3C fear, says ASSOCHAM
Industry body ASSOCHAM has said that with a view to containing non-performing assets (NPAs) in banks, the government should empower the boards of the public sector banks to deal with the bad assets with the help of a special purpose vehicle which can lay broad guidelines for the lenders to take "haircuts" and cut the losses in the sectors in distress, without fear of 3Cs - CAG, Central Vigilance Commission and CBI.

ASSOCHAM said that steps of empowering PSU banks board and formation of an SPV, which may be called 'Asset Revival Bank' (ARB) should be implemented without further delays. The industry body said that this would instill confidence in the bankers to take decisions about restructuring the loans to sectors such as steel, construction, power etc.

ASSOCHAM Secretary General D.S. Rawat in a release said that the new institution had been tried in China which has been managing the problem at a much higher scale.

He said the ARB should be structured in a manner so it can be kept outside the purview of the 3Cs which, can, otherwise, created, or have rather already created enough fears among professional bankers not to take even routine decisions of sanctioning fresh loans. ]

"So far as taking a call on the NPAs or writing them off or cleaning the balance sheets are concerned, these have become a clear no-no because of the fear of being hounded even after retirement," said D.S. Rawat in a statement.

The ASSOCHAM said in a growing economy where the total loan portfolio or the book size of the banks needs to grow, writing off Rs 12,000-14,000 crore bad loan a year should not raise eye-brows and be treated as part of a normal business risks.

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