The finance ministry has asked state-run banks to nudge their defaulting corporate borrowers to sell off their non-core assets and repay the loans from the funds raised. 

The move comes after the ministry directed these banks to constitute board-level committees to monitor recovery and put in place guidelines for an early warning system as part of their non-performing assets (NPA) management. 

Officials at the ministry, however, say these moves are not meant to impinge on the banks' autonomy. 

"We are not interfering in the banks dayto-day business," a senior finance ministry official said. "It is a part of the overall strategy to strengthen the recovery mechanism. We will continue to appraise banks through our nominees on their boards." 

The official said if needed lenders should pressurise defaulting borrowers to exit out of such ventures. Banks are already putting pressure on the debt-laden Bhushan Steel to sell its non-core assets. Neeraj Singal, the company's vice-chairman and MD, was arrested by the Central Bureau of Investigation in an alleged cash-for-loan scam, in which Syndicate Bank chairman SK Jain is one of the accused. 

Around 35 banks, including the country's biggest State Bank of India, have an exposure of around Rs40,000 crore to the firm. "We want banks to identify problem loans at an early stage, so that effective remedial steps can be taken," the official quoted earlier said, adding that a regular review can prevent accounts turning into bad loans. 

State-run lenders are already battling in courts to declare the now beleaguered Kingfisher AirlinesBSE -4.86 % and its promoter Vijay Mallya as wilful defaulters. Kingfisher Airlines owes about Rs 4,022 crore to a consortium of 17 lenders. "Promoters should bring in money and it should be made clear to them in the initial stages itself," the finance ministry official said. 

Bankers, however, are not convinced with the government's stand. "It cannot be a blanket policy for all such accounts. It has to be dealt on a case-to-case basis," executive director of a state-run bank said, requesting anonymity. There is support for government move also. 

"If the company is defaulting on its payment, it is best in everyone's interest that it should deleverage itself through all means," said MP Shorawala, an independent director with Central Bank of IndiaBSE 0.30 %. The gross non-performing assets of state-run banks touchedRs2.16 lakh crore at the end of March, an increase of 39% over the previous fiscal. 

The government is also looking to set up fast-track courts to try loan default cases of over Rs100 crore as part of a plan to reduce the pile up of bad loans at state-run banks. The finance ministry has set up a committee advised by VK Bhasin, former secretary in the law ministry's legal department, to suggest measures to deal with high-value wilful defaulters. (Economic Times)