NEW PLAN WILL DELAY RECOVERY, SAYS INDIAI NC
Corporate leaders on Tuesday said the Reserve Bank of India’ s (RBI’s) move to bar all corporate debt-re cast programmes and send them to the National Company Law Tribunal( NC LT) after a six month window is “disruptive” and will impede industrial revival.
“The RBI should first tell us how many of their previous plans, such as S4A, CDR, 5:25schemes, etc, have worked? If these schemes were a failure, then the RBI should first acknowledge it. Now, what is the guarantee this scheme will help banks or corporate entities ?” said a chief executive of a large infrastructure firm, asking not to be named .“This move is disruptive and will certainly bring down credit growth of banks to the corporate sector, as no company will start a new project ,” he added. Late on Monday evening, the RBI scrapped all existing norms and said companies will get six months from March 1 to get their house in order or go for bankruptcy .“If a scheme is not agreed upon and implemented already, then SDR (strategic debt restructuring) will no longer continue, as all schemes will be dismantled with immediate effect by the RBI ,” said a corporate lawyer.
This is likely to impact the debt-re cast plans of infrastructure, power, telecom, and road companies, headded.
This comes at a time when industrial production moderated to 7.1 percent on a year-on-year basis in December last year, despite a favour able base effect. The moderation was due to lower growth in manufacturing, infrastructure, and consumer goods.
The chairman of a large company said the RBI move would make sure that stalled projects in the power and infrastructure sectors would remain stalled. He added that the central bank should have taken into account external reasons that led to a company becoming anon-performing asset.
Many telecom companies turned defaulters after the Supreme Court cancelled lic en c es granted by the government in 2012. Similarly, many power companies failed to take off as coal mine allotments were cancelled.