The Big Banking Defaulters

by Amit Bhushan on Saturday 24 June 2017, 4:27 PM | Category: Loans & Investment| View: 259 views
 
 
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The Big Banking Defaulters

                                             By: Amit Bhushan                                Date: 24th June 2017

 

With some actions proposed now for select defaulters under the Insolvency and Bankruptcy Code, all eyes seem to be on how the NCLT deal would with these large defaulters. Wild speculations about how would it impact ‘politics' as well as ‘hair-cuts' are on in the commercial news media and the discussions are being kept at the superficial level on who managed to get away with how much (speculation) and perhaps who got what (speculation) as the proceedings go on. How would or should banking be impacted as a result of learning from these large default cases is no ones' worry because the politics perhaps may not want process to take over resolution of the default cases. As it is, it required a central bank nudge to go for such resolution rather than bank proceeding to NCLT as a process. Basically, if such cases are put through such measures as a process than the erring bankers and promoters will be under pressure to avoid defaulter's tag which put perhaps cut off the supply of bank credit for these promoter groups including the other companies of the promoters. However by being able to avoid such tagging, the lines of borrowing for such promoters is kept open, allowing the problems to fester and become big, which than requires still more political heft to handle defaults.

As it is the politicians, once in power are status quo-ist rather than ‘change seekers' with promoters of large projects indulging them in every which manner to curry favours. Help from banks to keep the tap of credit on helps these promoters to further build upon the nexus to keep ever-greening their borrowings and pushing new projects. This leads to swelling of loans to the same promoters, accentuating problems and political netas further avoiding the possibility of unravelling bigger mess while at the same time not leaving an opportunity to curry favours. Now with time bound default case resolution (in principle), a bevy of legal and asset restructuring experts are around to proffer their services and viewpoints to those who care. While the outcome of the kick started process is still awaited, however the intensity of debate to question the competency of authorities on judgment seat, as well as the navigators viz. legal and asset reconstruction experts, industry experts as well as possibility of overall loss to banking system being speculated to be much more than arriving at compromise with promoters; is already on. There is limited insights on how so many bankers failed to assess viability of the projects of these groups, and how better modelling could be done in future. Let's see the ‘Game' evolve….   

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