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This refers to the Banking Reforms Bill proposed in the Budget to pave the way for the asset reconstruction company (fund) to tackle the growing non-performing assets (NPAs), aggregating Rs 64,000 crore, locked up by the banks and yielding no income. Banks are to chip in some funds to create ARCs to take away the bad loans from their books.

By separating the hardcore NPAs and selling them to the recovery agency through the ARC, the basic problem of collecting the dues of chronic defaulting borrowers cannot be fully addressed in the true sense of the term `recovery'. It is really strange and unfortunate that banks are able to force recovery from the small borrowers but are helpless when it comes to large borrowers who are either wilful defaulters or whose business did not take off as envisaged and appraised by banks.

Defaulting industrial and business houses taking refuge under the labyrinthine legal process has been the order of the day in the credit delivery system. The Narasimham Committee has said that the ARF should facilitate the recovery of dues from borrowers in respect of whom banks and financial institutions have decided to recall the loans and proceed with enforcement of securities. Thus, if ARCs are to function as an extended wing or an arm of banks, it would be a meaningless exercise. It is better to leave it for private management, after ensuring that the legal reforms are put in place.

R. S. Raghavan

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