Industry body- the Associated Chambers of Commerce and Industry of India (ASSOCHAM) welcoming the government's move to amend the Banking Regulation Act, along with enabling changes in other related laws, has proposed the formation of 'Stressed Assets Funds' (SAFs) with active participation of the cash rich public sector firms to deal with the problem of rising non-performing assets (NPAs) in the banking system.
As per Industry body, the formation of SAFs will help in revival of the assets under high leverage and once these assets are brought back to shape, the pay-backs to the SAF can take place. It has further suggested that different forms of the SAFs can be thought of, including some which can be neutral to creating a hole in the government finances.
It further said that some of the cash rich public sector companies can be encouraged to participate either in the SAFs or take over some of the assets where the present promoter wants to exit and with the green shoots in several of the sectors, this could even be an opportunity for the government or Special Purpose Vehicles to buy assets at much lower valuations. ASSOCHAM also recommended that adequate working capital should be extended to the existing promoters in cases where the stressed assets or NPAs can be turned back into healthy assets.