Making IBC tick

Apropos ‘A non performing code for bad debt’ ((June 29), though the Insolvency and Bankruptcy Code may not have lived up to its promise in the five years since enactment, there is still hope that it would become a potent recovery weapon, going forward.

The substantial recoveries in a few IBC cases is a silver lining in the grim situation. To improve matters, the NCLT needs to stick to the timelines in case of resolution. The green signal given to the banks by the Supreme Court to proceed against the promoter guarantors in cases involving haircuts should further strengthen their recovery efforts.

The impending introduction of a bad bank, with sufficient safeguards against ‘reckless lending’, may well be a game changer. Relieved of the cumbersome recovery efforts, banks may focus on quality lending, in which the proposed introduction of a ‘Public Credit Registry’ would be a boon. Armed with updated information about borrowers, banks may move away from the traditional ‘asset based lending’ to ‘cash flow based lending’, with safeguards like ‘lockbox system’ in place, giving a fillip to the nation’s informal economy.

V Jayaraman

Chennai

Explore more options

The IBC by itself is not a magic wand and many mechanisms starting from BIFR have all not been very successful. The debt recovery under IBC depends on the resolution plan, and if the sale is of one or more going concerns, the recovery is likely to be more. However, it will be a challenge to work out such reorganisation in the stipulated time of 180 days.

Banks have to explore mergers and acquisitions more aggressively as when assets are sold under liquidation the realisation is likely to be less.

The eligibility for pre pack resolution plan may have to be extended for more cases where promoters are not the cause for the default so that time spent on resolution process can be saved.

M Raghuraman

Mumbai

Blaming PSBs

Apropos ‘Onus on banks’ (June 29), it is unfortunate that the onus of getting out of the economic mess is being laid at the doors of public sector banks. Everybody else is shrugging off their responsibility. Later, when these loans burn a big hole in the balance sheet of the banks, the lenders are blamed for their inefficiency and privatisation is touted as the panacea to make banking profitable.

Why doesn’t the government transfer a part of the responsibility to private banks, which it claims are better managed, and see what happens?

Anthony Henriques

Mumbai

Robust external sector

This refers to ‘India has managed its external sector well’ (June 29). Indeed, a calibrated management of the external sector has resulted in foreign exchange reserve surging from $4.7 billion in 1991 to $605 billion now. Avoiding full capital account convertibility, copious long term capital inflows in the non-debt category, ushering in market determined exchange rate gradually, and NRI deposits have ensured that the external account is stable.

The FDI and FII inflows are abundant, too. The ongoing pandemic is not making any major impact on the external sector. Policymakers have built a strong external policy framework, thanks mainly to the learnings from the BoP crisis in 1991.

NR Nagarajan

Sivakasi

Anti-drone system

The recent drone attack on an Indian Air Force station in Jammu, which caught India’s security establishment off guard, is a grim pointer to the challenges that emanate from such unmanned aerial vehicles to our national security. Many suspect it to be an attempt to derail the efforts now being made to restore a democratic political process in Jammu and Kashmir.

With drones becoming a key component of modern warfare, no stone should be left unturned to develop an advanced anti-drone system that can effectively intercept and neutralise suspicious remote-controlled aerial platforms.

M Jeyaram

Sholavandan, TN