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Banks would need to write off their losses between 40 and
70 per cent in at least 240 companies, which are under heavy debt mostly in
steel, construction, power, textiles and infrastructure, a study said.
The study, jointly conducted by Associated Chambers of
Commerce and Industry of India (Assocham) and India Ratings and Research
(Ind-Ra), also suggested asset reconstruction to cut their losses with the help
of revamped asset reconstruction companies (ARCs) sector.
This will help banks achieve a sustainable level of bank
debts, going down as non-performing assets (NPAs), said the study, which will
be released at an event here on Friday, according to an Assochamstatement.
The study noted that the gross non-performing advances
rose sharply to 7.6 per cent of gross advances in March 2016 from 5.1 per cent
in September 2015.
"Asset reconstruction companies need re-positioning;
the issue of bad debt amounting to Rs 6 trillion would need ARCs to re-orient
themselves, if they are to facilitate the resolution process,” the study said,
adding that the current capital position of ARCs can at most take care of 10
per cent of the bad debt in the Indian banking system.
“The number of ARCs has been inadequate vis-a-vis the
need. However, that scenario is about to change. In the Union Budget 2016-17,
100 per cent foreign direct investment (FDI) has been allowed for ARCs which is
expected to substantially improve their capital base,” said Assocham President
Sunil Kannoria..
“Moreover, the introduction of the Bankruptcy Code has
now positioned ARCs as a very important intermediary between lenders and
borrowers,” he said.
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