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An ARC for PSU banks mooted

The finance ministry is said to be toying with the idea of setting up an asset reconstruction company to handle toxic assets of all public sector banks. Non-performing assets of state-run banks rose to 4.44% of their gross advances at the end of March 2014, from 2.32% at the end of March 2011. These banks have, so far, been unsuccessful in selling their NPAs through the existing 14 ARCs. The new ARC may also be aided by debt recovery tribunals to fast track the sale of assets. In a recent presentation to finance minister Arun Jaitely, the department of financial services suggested enactment of a new legislation with a provision for setting up special courts to deal with high value, wilful defaulters. The top 30 NPAs of public sector banks account for 40.2% of their gross bad loans. The finance ministry is also examining a proposal that banks should be allowed to fund acquisition of domestic companies to resolve non-performing loans.

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