Government has set up a committee of bankers to give recommendation on formation of an Asset Management Company or Asset Reconstruction Company for resolving the issue of bad loans. The committee will be headed by Sunil Mehta, recently appointed non-executive chairman of Punjab National Bank and it will come out with recommendations in two week time.

After a brainstorming session with the chiefs of 12 Public Sector Banks, Finance Minister Piyush Goyal announced this during a press conference in Mumbai. “The discussion during the meeting focused on credit flow and bank devising mechanism to ensure that good borrowers doesn’t face difficulties”, said Goyal. The Government stands firmly behind each of the 21 PSBs, he added.

Prominent economists including Deputy Governor of RBI Viral Acharya have discussed of setting such mechanism earlier on. The idea is also reflected in the Economic Survey of India 2018.

However the specifications of this was not given as the Mehta Committee will look into the matter and come out with the required recommendation.

“Banks have many functions and if you move out the stressed asset to a specialised entity, banking can focus on regular business”, said Rajnish Kumar, chariman of SBI.

Goyal added that risks need to be mitigated to support economy and all bankers wished to set up a mechanism to enable faster resolution of stressed accounts.

Furthermore he added that all vacant positions of PSB heads will be filled in the next 30 days.

Suggestions about strengthening governance process and honest recognition of NPAs or bad loans were discussed at the meeting. Goyal assured that processes will be streamlined with customer interest protected.