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Clear policies, project clearances key to NPA fight: Kochhar

By Religare
|

ICICI Bank chief Chanda Kochhar said rather than blaming banks for shoddy diligence, predictable policies and "unshackling" stuck projects are the key to tackle the problem of bad loans, reported PTI.

"Rather than questioning the due-diligence processes of banks, I think it is important to say that let us make things clear and predictable," she said, speaking at the second SBI economics and banking conference.

"What is most important requirement for the banking sector is to unshackle in a way the existing projects that are stuck for some reason or the other," Kochhar said, adding some very good projects are stalled due to want of go-aheads.

 

Speaking at the same conference earlier, Reserve Bank Governor Raghuram Rajan said, "there is a component of poor project evaluation and poor project structuring. Do we have adequate evaluating capabilities? If yes, how do we ensure it is well distributed, and if no, how do we generate it?"

The gross non-performing loans of ICICI Bank are among the highest in large private banks. The lender has attributed the stress to incidents of recast assets slipping into NPA, though the financial powerhouse hinted at the situation easing at its last earnings call after the June quarter results.

Kochhar said everytime money is given to a company by a bank or when an investor puts it in, there are certain set of assumptions which are made. When the assumptions go awry, it leads to stress.

"The moment you have a reliance on acquisition of land or access to natural resources or your offtaker is a government entity, you come up with lots of issues. And that is where things have come to a stall when you try to look at projects."

In what can be startling comments, the head of India's largest private lender admitted banks have given loans without proper structuring of loans and based on certain assumptions.

"If in India the bankers had waited for fully structured projects, I would not like to say this, but it is true, no infrastructure investment at all would have happened in this country.

"First of all, we should give it to the thing that we belived in India, we believed in we have it to move forward, therefore we funded the projects," she added.

 

It may noted the infrastructure sector accounts for a bulk of the NPAs banks are saddled with, along with other sectors like steel and power, where projects are stuck for want of clearances.

Story first published: Friday, August 21, 2015, 9:10 [IST]
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