POLICY POINTERS


Public sector banks target 15% slash in NPAs

Public sector banks are targeting a 15 per cent decrease in non-performing assets (NPAs) during the current fiscal with NPA levels expected to go down by about Rs. 7,500 crore.

Speaking after a Bankers-Borrowers meet organised by the PHD Chamber of Commerce and Industry Shri S.S. Kohli, CMD PNB and President IBA said that if all PSU banks put together can decrease their NPA levels by Rs. 7,000 crore, then the profitability of the sector will double in the next fiscal.

The NPA levels are expected to decrease as a result of the recently released Reserve Bank of India guidelines on recovery of bad and doubtful debts up to Rs. 5 crore and the finance minister, Shri Yashwant Sinha’s directive to bank chiefs to personally monitor loans above Rs. 10 crore.

The minister of state for finance, Shri Balasaheb Vikhe Patil told Parliament on 25.08.2000 that the Financial Services Authority will include representatives from public sector banks, professional experts and RBI officials and will work under the RBI.

He said the government is providing 2,500 crore for restructuring proposals and 3,000 crore for recapitalisation of the three weak public sector banks viz., UCO Bank, Indian Bank and United Bank of India. But he said no names have been finalised for inclusion in the FSA.   Shri Patil said that it is necessary to include Co-operative Banks under the ambit of the Banking Act to ensure they run without bureaucratic interference and as viable units.

The new Industries Act  to include Regulations for SSIs

The Cabinet is set to approve the new Industries Act shortly to replace the existing Industrial Development and Regulations Act.  

The Act will retain the provision of licensing “as the government cannot do away with the system on considerations of security, strategic concerns and social reasons.”   Simultaneously, the Act recognises the need to regulate foreign direct investment as there is no such provision in the current Act.

Accordingly, the new Act has a provision to give statutory backing and support for the Indian companies for all FDI/FTC/NRI approvals held by them. The scope of the Act has been extended to include even those industries where the number of workers employed are less than 50. The Act has also laid down stiff penal provisions on companies violating the Act including a rise in the rate of interest from banks for defaulting companies.  Among the other major provisions of the Act are the regulations for small scale industries.

Customs duty on SSI, telecom sectors items cut

The Government on 01.09.2000 notified a decrease in basic customs duty on a number of items used by the telecommunications including radio pagers and optical fibre.   The government also announced a decrease in customs duty on a number of items used by the small scale sector.

For the telecom sector the government decided to reduce basic customs duty on optical fibre from 25 per cent to 15 per cent.

Pagers and their parts will also be levied a customs duty of 5 percent instead of the earlier level of 25 per cent. 

Tribunals to look into liquidation of sick firms

The Justice Balakrisna Eradi Committee, set up to speed up liquidation and insolvency procedures in India has recommended the setting up of tribunals to effect liquidation of bankrupt industrial companies Act within the ambit of the Companies Act.  It has laid down a time limit of 90 days for the tribunal to review and take a decision on such cases.   The committee has also recommended the appointment of professional liquidators in place of government liquidators.

The definition of sickness or bankruptcy is being changed to a more comprehensive definition including a clause on debt default.   This is in addition to the present clause regarding declaring an industrial company sick following the erosion of over 50 per cent of its net worth.   This will ensure detection of sickness in time.   

A national tribunal at the Centre and various regional benches comprising members who are experts on the Companies Act has been recommended as an alternative to the Board for Industrial and Financial Reconstruction (BIFR).

The committee has recommended incorporation of a new substantial provision in the Companies Act to adopt the UNCITRAL Model Law as approved by the United Nations as a schedule to the Companies Act to apply to all cases of cross-border insolvency.  It has recommended the adoption of the ‘Principles Enunciated under the Legal Frame-work.  Orderly and Effective Insolvency Procedure-Key Issues of the Legal Department of International Monetary Fund. in the Companies Act to make it in line with international practices.