Transfer APNs to the wrong bank at their book value, according to parliamentary panel

A parliamentary panel recommended that stressed banks ‘assets be transferred to the wrong bank offered at their book value, because the more these assets are left on lenders’ balance sheets, the more the prospect of their value erodes.

The Parliamentary Standing Committee on Finance said the bad bank, which will be owned by both public and private sector banks, will help save time and avoid delays in resolving bad loans through consolidated decision-making.

The Union budget 2021-2022 proposed the creation of a bank-led reconstruction and asset management company to take over and consolidate the existing stressed debt, which would manage and sell the assets to alternative investment funds .

The panel urged the Reserve Bank of India to clearly define each step of the procedure in order to remove any ambiguity or discretion on the part of the banks. “… RBI can play a decisive role in the success of Bad Bank if it issues an order or notification that makes the whole process perfectly clear, defining each step of the process, thus removing any ambiguity or discretion from the share of the bank, ”said the panel, led by BJP MP Jayant Sinha.

Regulatory intervention at this point will further streamline and speed up resolution of stressed assets, according to the report. “The RBI must demonstrate why the proposed rules for transferring losses to ARC-AMC are in fact the best approach,” the panel said in its report.

“Their rules must reflect both administrative clarity and economic logic,” he said.

The RBI should step in as soon as possible to unlock the value of non-performing assets, he said.

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