Cleanliness of $ 190 billion bank loan is necessary for Modi’s growth

Investors expect Modi to start reform during his first term when India started the timely bankruptcy process

It is important to clean up the 190 billion dollars of stressed bank loans to revive economic growth during Narendra Modi’s second term as Prime Minister.

A few days after the landslide election victory, Modi is being forced to focus on the economy after the slowest expansion of five years. The crisis between the shadow lenders has been curbing the advancement of the area and consumer spending has been banned in recent months, coming from the top in the years of slow loan growth of banks by non-executed loans. It is necessary to revive the lenders to start private investment and consumer spending.

Investors expect Modi to start reforming during his first term, when India started a time-bound bankruptcy process, giving notice to the business community by snatching the property from the largest defaulter and selling them. While a two and a half year old law has helped banks to improve the rate and speed of bad credit recovery, long-term court battles have delayed the transaction and have troubled some foreign investors.

We have to find a way to speed up the process, said Rajneesh Kumar, chairman of the largest bank of State Bank of India (SBI). So far the results – despite the delay – are good for the system, he said in an interview recently, adding that Bankruptcy Law needs to be reviewed periodically.

According to official figures, by March, nearly one-third of India’s bankruptcies had exceeded the 270-day deadline set by the law.

In fact, the 12 big debtors – the so-called dirty dozen – which were pushed by the banking regulator to the bankruptcy courts in 2017, only five have been successfully sold with lenders, which on average receive approximately 39 percent of the outstanding charges. The rest have been delayed by the problems faced by previous owners, including losing bidders, financial and operational creditors.

In the last year, after the court verdicts, the potential bidders have been cautious with India’s emerging insolvency process, late bids are considered in the interest of higher realization. The top court also threw the circular of a central bank, which made a timeline compulsory for refilling the criminal accounts or transfer to the bankruptcy court.

The lack of judges and the lack of adequate infrastructure can probably increase these problems because the case load goes forward. There was already 1,143 insolvency proceedings at the end of the first quarter, from 544 at the end of March last year.

Head of Kotak Investment Advisors Ltd Srinivasan said that maintaining the purity of delay between the Resolution Time Lines and Court battles is a fundamental problem if you want some serious investors to make bids for stressed assets. Dhabi Investment Authority has participated in investing in distressed properties in India.

On Thursday, Joint Secretary of the Corporate Affairs Ministry (MCA) Dnyaneshwar Singh said that the government is planning to build capacity in the courts, so efforts can be made to resolve bankruptcy cases more quickly. He said that India hopes to present a framework for dealing with border insolvency within the next three to four months, he said at a conference in Singapore.

According to Crisil’s report, the lenders have recovered 25 billion dollars, or about 25 billion dollars, of which approximately 25 billion dollars have been recovered from the outstanding amount by the courts in 94 cases of defaults. How does a comparison globally?


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