Don’t wait for bankruptcy law to deal with defaulters: Govt to banks | business | Hindustan Times
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Don’t wait for bankruptcy law to deal with defaulters: Govt to banks

Even before the bankruptcy code bill becomes law, the government, which is looking to focus on “swachh banking,” may introduce a mechanism that would allow banks to handle the problem of mounting non performing assets (NPA) and take up the stressed projects and change managements of the companies handling them to ensure that all is not lost.

business Updated: Feb 17, 2016 18:54 IST
Mahua Venkatesh
Swachh banking

The government increased the recapitalisation amount for banks to Rs 25,000 crore for the current financial year as well as 2016-17.(REUTERS)

Banks are likely to be given the authority to rescue stressed projects and change their managements even before the bankruptcy code bill becomes law. They will be allowed to go ahead with the bidding process within a stipulated timeframe, as was the case in the erstwhile Satyam Computers.

A meeting was held between the Central Vigilance Commission (CVC) and the major banks including State Bank of India chairman Arundhati Bhattacharya to come up with viable solutions even before the bankruptcy code bill

becomes law. A few stressed steel and power projects may be taken up as a test case.

The move is also aimed at setting a fair valuation of the stressed assets and arrest their dwindling production. However in certain cases, banks are also willing to allow the promoter to retain a portion of her stake though Valuation reports are often inflated without any cross check.

“We need to have a mechanism in place to ensure that this situation (of mounting NPA) is not repeated and we are collectively looking at the issue,” TM Bhasin, vigilance commissioner told HT.

Sources said that it may take “some” time to have the bankruptcy code in place.

Bhasin added that the CVC will ensure that transparency in the bidding process is fully maintained.

Meanwhile, the government increased the recapitalisation amount for banks to Rs 25,000 crore for the current financial year as well as 2016-17. However, with Reserve Bank of India has asked banks to “clean up” their pile of bad loans Finance minister Arun Jaitley announced a recapitalization amount of Rs 70,000 crore in the next four years.