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Our Bureau

Kolkata , June 10

INDIAN Banks' Association plans to move Supreme Court to prevent defaulting borrowers from exploiting a stance taken by the judiciary with respect to a key provision of the Securitisation Act.

IBA's proposal is specifically directed against an action taken by the apex court in early April, which resulted in the striking down of Section 17(2) of the Act.

This Section provided for pre-appeal deposit of 75 per cent of the liabilities, if a defaulting company wanted to appeal against the order of attachment of its assets.

``IBA is under pressure from member banks. We will examine the possibility of moving Supreme Court on the matter. There should be a pre-deposit of at least 25 per cent of the liabilities,'' Mr H.N. Sinor, Chief Executive, IBA, told newspersons here on Thursday. He was in Kolkata to attend a meeting organised by the Federation of Indian Export Organisations.

Banks should be given some freedom to determine the dividends that may be paid to shareholders, IBA has also opined in the context of the recent stipulation by RBI with regard to dividend payment. ``The payout ratio system seems better,'' Mr Sinor said. He, nevertheless, added that the banking regulator has generally displayed a willingness to consider IBA's views in a positive manner.

Earlier, in an address to exporters, the IBA chief underlined the need for a stronger banking system, especially so in an era of competition. There are opportunities emerging from newer markets, including those in Africa and Russia. A number of global issues are also becoming important for Indian banks. The latter, not satisfied at the prospects of sitting on large amounts of resources, are continuously exploring fresh business opportunities. ``We are always looking around for potential borrowers to whom we can lend at reasonable rates,'' he said.

IBA, it may be mentioned here, has a number of committees to handle various important issues. These include risk management, agri-business, technology and accounting. At the moment, issues relating to risk management are gaining importance, especially in the context of Basel II. A lot of changes (in various legislations) are being contemplated as well. On another front, the association is looking at different security aspects, including those related to physical and technological infrastructure.

Service charges will not be standardised.

IBA, Mr Sinor said, was not ready to take up the proposal of uniform service charges, mooted by some sections of the market. Its members, being organisations that are run on commercial lines, should be allowed to levy charges of their own, depending on their outlook. ``There is no point in calling for uniform rates,'' he said, adding that banks in India were ready to support strong borrowers.

More Stories on : Non-Performing Assets | Courts/Legal Issues | Securitisation

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