Banks consolidation next fiscal, priority to end NPAs: BBB chief Vinod Rai

New Delhi: The consolidation of more banks may begin from next fiscal as the priority today is to unlock the jammed lending system with the Non-Performing Assets (NPAs) sitting over balance sheets of banking institutions, Banks Board Bureau chief Vinod Rai said Tuesday.

He said it has been decided to remove NPAs from banks balance sheets by this fiscal end.

Rai said the lending activity in banks has got totally jammed because of stressed assets sitting on their balance sheets.

"Capital has got locked and banks do not have enough capital to start the lending process. So our priority one today is to try to unravel or unknot the entire process where we bring about certain amount of resolution. We do one-time settlement. May be we remove some of the assets which are sitting on the balance sheets of banks," he said while addressing Chief Vigilance Officers at Central Vigilance Commission.

Rai said "what we have decided ourselves is that from today till may be December 31, or may be on the outer side by March 31, the process of removing stress from balance sheets of those banks" will end.

"We have decided to put all our energy into that process. Trying to ensure that lending process starts again because whatever banks might be doing they are not sticking out to lending for infrastructure. Unless you lend for infrastructure, the constraints for the growth of economy will always be there. 

"For the time being the priority is to start the lending

process," said the chief of BBB, that advises the government on top-level appointments at public sector lenders and ways to address the bad loans problem among other issues.

To a question over consolidation of banks, Rai said there are teams trying to work on it and it will be sorted out post April 1.

He said "if you saddle the banking administration with consolidation, which is a huge exercise by itself, it will create a lot of confusion".

"But at the same time there are teams outside the banks which are working and trying to see which are the best fits. But unfortunately, for public sector banks it is not purely on merit that consolidation will take place. You just can't make XYZ bank disappear let's say from Kolkata, the entire political establishment will be up in arms...

"So you have to ensure that consolidation process takes place where you take union along with you but more importantly the political environment around that area. So that kind of work is in progress. It will be sorted out. But it will be sorted out post April 1. Believe me the decision making, if you call it delay, it is not delay because a lot of thoughts are going into it. Because you cannot saddle financial institutions," Rai said.

Referring to a recent decision on takeover by State Bank of India with its associate banks, he said the SBI was picked up for reasons including the same working culture among its and other units.