Banks cheer plan to oust defaulting promoters
KOLKATA: Banks have started sharpening their claws to act tough on defaulters as they are poised to get their long-pending rights as lenders to throw out failed managements. Reserve Bank of India governor Raghuram Rajan's promise to give banks more powers in handling the NPA menace has given bank chief executives a sense of new hope when rising non-performing assets are pulling down profit numbers every quarter.
"Banks will start looking at change of management as a strategy to keep the account in good shape," Punjab National Bank chairman and managing director KR Kamath told ET. "The finance minister's and the governor's statements have sent a strong signal to defaulters. We expect wilful defaulters to behave better now," Kamath said. Finance minister P Chidambaram, too, last week told banks to deal differently with defaulters.
RBI has promised fresh steps to curb bad loans, especially those arising out of mismanagement of funds or wilful default. Bank CEOs have been screaming from the top of their voices saying that several promoters are wilfully diverting funds and pressurising banks for restructuring under the guise of economic slowdown.
As on June, the corporate debt restructuring cell has approved 415 accounts amounting to Rs 2.5 lakh crore while 42 cases involvedRs48,187 crore. The CDR mechanism covers multiple banking accounts, syndication and consortium accounts, where all banks and institutions together have an outstanding aggregate exposure of Rs10 crore and above.
Continuation of promoters under the corporate debt restructuring was making the entire efforts meaningless as Rajan promises US-style bankruptcy. "Promoters do not have a divine right to stay in charge regardless of how badly they mismanage an enterprise nor do they have the right to use the banking system to recapitalise their failed ventures," Rajan had said after taking charge at the country's central bank.
"I think he is doing the right thing. Under the garb of economic slowdown, several promoters have wilfully diverted funds to unrelated businesses and they are now pressurising banks for a restructuring of the accounts," said United Bank of India chairperson Archana Bhargava.
RBI has estimated that gross NPAs may rise to 4.4% from 3.9% at June end if the macro-economic situation does not improve. Besides, restructured loans rose to 6.1% last fiscal from 2.8% in December 2010. Rajan has mandated deputy governor KC Chakrabarty to take a close look at rising NPAs and the restructuring process.
"Banks will start looking at change of management as a strategy to keep the account in good shape," Punjab National Bank chairman and managing director KR Kamath told ET. "The finance minister's and the governor's statements have sent a strong signal to defaulters. We expect wilful defaulters to behave better now," Kamath said. Finance minister P Chidambaram, too, last week told banks to deal differently with defaulters.
RBI has promised fresh steps to curb bad loans, especially those arising out of mismanagement of funds or wilful default. Bank CEOs have been screaming from the top of their voices saying that several promoters are wilfully diverting funds and pressurising banks for restructuring under the guise of economic slowdown.
As on June, the corporate debt restructuring cell has approved 415 accounts amounting to Rs 2.5 lakh crore while 42 cases involvedRs48,187 crore. The CDR mechanism covers multiple banking accounts, syndication and consortium accounts, where all banks and institutions together have an outstanding aggregate exposure of Rs10 crore and above.
Continuation of promoters under the corporate debt restructuring was making the entire efforts meaningless as Rajan promises US-style bankruptcy. "Promoters do not have a divine right to stay in charge regardless of how badly they mismanage an enterprise nor do they have the right to use the banking system to recapitalise their failed ventures," Rajan had said after taking charge at the country's central bank.
"I think he is doing the right thing. Under the garb of economic slowdown, several promoters have wilfully diverted funds to unrelated businesses and they are now pressurising banks for a restructuring of the accounts," said United Bank of India chairperson Archana Bhargava.
RBI has estimated that gross NPAs may rise to 4.4% from 3.9% at June end if the macro-economic situation does not improve. Besides, restructured loans rose to 6.1% last fiscal from 2.8% in December 2010. Rajan has mandated deputy governor KC Chakrabarty to take a close look at rising NPAs and the restructuring process.
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