Friday, August 21, 2015

Our Decrepit Debt Recovery System

A consolidation of laws and legal processes is called for at the earliest

India’s debt recovery apparatus is an alarming mess. Consider this: we have four Acts, two sets of tribunals, ₹2 trillion worth of debt recovery tribunal (DRT) cases and ₹6 trillion in NPAs. These NPAs are a subject of labyrinthine discussions, appraisals and reappraisals – carried out by the RBI, Finance Ministry and even TV channels. None of all this seems to be getting us anywhere.
To get a fix on the debt problem, we need to understand the tangle of laws dealing with it and the system of courts and tribunals responsible for the implementation of these laws. The four Acts in question are: Sick Industrial Companies Act, 1985 (Act 1 of 1986), Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFA), 1993, The SICA Repeal Act, 2003, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act (Sarfaesi), 2002.
Apart from Debt Recovery Tribunals we also have the National Company Law Tribunal under Companies Act (Second Amendment) 2002 to settle BIFR cases.

Monday, August 3, 2015

NPAs - the perpetrators go scot free

If the RBI and MoF representatives on the Boards of Banks had prevented approvals of some corporate loans and brought collective wisdom to do due diligence, NPAs would not have reached the current unsustaining levels. Otherwise, how could one explain the debacle like that of King Fisher sanctioned on the basis of Brand as collateral thousands of crores on the instance of the then Chairman of the SBI. And this Chairman goes scot free royal. The successors have to cool their heels. 

It is important that the regulators get out of Boards of PSBs. Government of India, as owner, would do well to provide equity and discipline by sending more qualified representatives on the PSB boards and not the persons who are trying to learn the alphabets of banking. By being in the MoF for donkey years does not make one an expert in banking and finance!!

This is my response to Mrs Usha Thorat's article on the subject in Live Mint dated 15th july 2015.