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Parliament panel urges tough action by banks

The standing committee on finance in a report to the Parliament said banks in the country will have to urgently tackle their troubled loans urgently and initiate measures to improve credit-appraisal capabilities and to make public the names of the main defaulters. The committee said in its report that the total stressed loans of the banks have reached Rs 6.8 trillion, including those classified as band and those restructured. The report said considering the effect bad loans have in eroding not only the overall image but also the capital and liquidity of banks, and also their ability to raise capital in the future, there is an urgent need for banks to reduce their stressed assets and clean up their balance sheets, lest they become a drag on the economy. The committee said it is not happy with the management of the problem by the bank or RBI, stating the banks had evidently failed to notice the early signs of stress. It suggested setting up specially empowered committees to strengthen the governance of large loan accounts and mandatory forensic audits of specific classes of borrowers to prevent a diversion of funds by majority owners of troubled companies. It has also suggested that banks make public the names of top 30 willful defaulters.

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