Saturday, June 25, 2016

Are we on the right track in tackling NPAs?

Are we on the right track for NPA resolution?
B. Yerram Raju*
In the last few years, barring the 2008 Recession and its global impact, no subject other than NPAs of the Indian Banks has occupied so much print space and media attention.

If good number of banks in the public sector has faltered in loan origination succumbing to external pressures, some others have failed to supervise their loan portfolio. But their contribution to NPA portfolio may not be more than 25 percent. NPAs that turn as bad loans are the real culprits. Only 20 percent of the total quantum of loans at the doorsteps of legal system could be resolved to the satisfaction of the banks, notwithstanding the projected empowerment of banks through the SARFAESI Act. The real reason is, therefore, beyond banks – the law and justice.

Friday, June 10, 2016

MSME Amendment Bill Destroys the Sector

MSMEs in India have great significance as they will be the drivers of ‘Make in India’, Start Up India, and Digital India strategies unfolded by the Union Government. They are governed by the provisions of MSME Development Act 2006, with the principal objective of promoting, developing and enhancing the competitiveness of the MSMEs.

Two years since the NDA government came to power MSME sector seems to be in a confused state with unresponding credit markets, slow moving equity, and adverse global positioning in spite of large potential for job growth.

MSMEs are redefined in September 2015 by way of amendment to rules to the 2006 MSMSE Act providing for vertical growth. Earlier definitions of SSI and MSMEs post 2006 accommodated horizontal growth and perverse incentives. But all the states have not fallen into grove.
New regulations and rules seem to be compounding the problems for the sector when it comes to revival and rehabilitation even as the Bankruptcy Law provides the long awaited relief for the large industry.