Resolving bad loans

With reference to ‘Banks and bankruptcies’ (March 25), various regulatory monitoring measures are in place to check and strengthen the asset portfolio and recovery mechanism of banks. Though banks have to mandatorily comply with the timelines for recognising the early mortality of the loan accounts, their primary objective is to keep the assets alive by restructuring and nursing the loan accounts based on their viability and scope. The Insolvency and Bankruptcy Code has come to the aid of bankers as the most preferred and effective legislative remedy for speedy and hassle-free NPA resolution in comparison with lengthy and time consuming judicial recourses through SARFAESI and DRT. However, if the IBC efforts lean more towards liquidations than revival, the same may not be a healthy scenario for banking in the long run. Though erring promoters need to be punished, genuine businesses need to be provided revival chances through a restructuring and supportive mechanism.

Bengaluru

It is unfortunate that the DMK is destined to carry the Congress as an Albatross around its neck every time there is an election in the State or at the Centre. The Congress demands seats disproportionate to its eligibility in terms of the party’s vote share or potential to win the seats. It is unfortunate that in the upcoming crucial elections to the Lok Sabha too, the Congress has taken 10 seats from the DMK, representing 25 per cent of the total constituencies. There are reports that there is a lot of resentment in the selection of Karti Chidambaram, against whom many criminal cases are pending, as the Congress candidate to contest the Sivagangai constituency. Sudarshana Nachiappan, one of the most deserving candidates who was assured of his candidacy by the high command till late last night, has accused P Chidambaram for this last minute change in favour of his son.

Chennai

Lenders don’t seem to have learnt from the Kingfisher fiasco and infused ₹1,500 crore into Jet Airways. Ideally, Naresh Goyal should have allowed a better and financially sound management to run his company rather than playing with the careers of the more than 23,000 employees. Lenders seem to believe that it’s better to explore revival of the company than take the IBC route. Though the IBC may not be the perfect and only solution, in the current circumstances it is the best alternative for the lenders. The RBI has been sensitive in its approach to ensure lenders get their money back on time and any promoter with bad intentions get the stick.

Noida

This has reference to ‘NCLAT sets aside order to liquidate Jyoti Structures’ (March 25). The resolution plan to be considered afresh involves payment of ₹3,905 crore over a period of 15 years after receipt of ₹50 crore (one per cent of the agreed amount) in the first year and ₹75 crore (2 per cent of the total) in the second year. Is it a resolution plan or an innovative loose-end restructuring to facilitate resolution at any cost? Is there any remedy, other than referring to NCLT once again, if the new owner defaults over the lengthy period of repayment? Even the present assets might not be available at that time. One fails to understand, how this resolution plan will be better than the liquidation value of ₹1,152 crore, which will come in two years, and can generate more than double the amount that will be received over 15 years.

The committee of lenders should remember that they remain accountable to any stakeholder, if apparent inadequacies or negligence are brought to light later on. While the aim of resolution under the IBC is laudable no one is benefited with proposals involving no material cash inflow upfront and uncertainties surrounding the staggered repayments later on.

Coimbatore

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