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Saturday, Nov 23, 2002

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The merry-go-round in recoveries continues

N.S. Vageesh

CHENNAI, Nov. 22

"WHAT this new measure has done is to bring the defaulters to the negotiating table". The new measure being talked of here is the Securitisation Ordinance, which is on the throes of becoming a law. And the quote is from the Chairman and Managing Director (CMD) of almost every public sector bank in the country.

Wind back to the years 1997 and 1998 and this is exactly what they said about the debt recovery tribunals (DRTs,). Go back to 1999 and 2000, this was exactly what they said when the non-discretionary one-time settlement scheme was announced by the RBI.

Nothing much came of it. Except perhaps orders for a lot of negotiating tables!

The markets are once again agog with excitement because the Lok Sabha has passed the Securitisation Bill.

Perhaps these figures compiled from a sample of a few banks may have a sobering effect on what seems like premature celebrations.

What the figures show is the extent of the problem. Even if one were to assume a 100 per cent strike rate in terms of success in recovering dues from the notices sent, these seven banks would get back only a little over Rs 2,500 crore when compared to around Rs 30,504 crore of non-performing assets that they have on their books. You might wonder whether banks would not be emboldened to pursue other borrowers to the logical end, if they met with such success. Here is another sobering thought from a seasoned banker: "We are like the dogs which chase cars and don't know what to do once the car stops. We don't know what we'll do with the assets once we seize them!"

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