New owners need clean slate under IBC: Rajnish Kumar
MUMBAI: State Bank of India (SBI) chairman Rajnish Kumar said investigating agencies should lay off companies undergoing insolvency resolution and restrict themselves to attaching personal assets of erring promoters.
The statement comes a day after a bankruptcy appeals court directed the Enforcement Directorate (ED) to release assets of bankrupt Bhushan Power and Steel Ltd (BPSL) after the federal probe agency on Saturday attached assets worth over ₹4,000 crore of BPSL, which is in the process of being acquired by JSW Steel Ltd under the Insolvency and Bankruptcy Code.
JSW Steel challenged the move in the National Company Law Appellate Tribunal, which asked ED to release the assets.
“Any action which ED or any other central authority has to take, they can take with the existing promoters and attach their personal assets, leaving their companies away,” Kumar, who heads India’s largest lender, said at an event in Mumbai on Tuesday.
Kumar said agencies should follow this rule, especially in case of companies undergoing bankruptcy process, as new suitors are “not fools” to risk their money. “The person acquiring a company cannot be subjected to any harassment by any agencies and I am sure that will be guaranteed now,” Kumar said, adding that according to the spirit of the bankruptcy code, an acquirer needs a “clean asset”.
RBI-BANKERS MEETING
Meanwhile, heads of state-run banks met Reserve Bank of India (RBI) governor Shaktikanta Das on Tuesday over the state of liquidity in the banking system, particularly with regard to nonbanking financial companies (NBFCs), the chief of a stateowned bank said.
According to the banker, who spoke on condition of anonymity, the conversation with Das was around the five broad themes of liquidity, credit offtake, small and medium businesses, stressed loans and transmission of rates. “This was largely a follow-up of Monday’s meeting with finance minister Nirmala Sitharaman,” he said. “It was a review meeting in which the governor wanted to assess the current situation in these five segments.”
Even though the banking system has surplus liquidity, banks have turned cautious about lending to NBFCs, leading to payment defaults. According to data compiled by Bloomberg, system liquidity remained largely in deficit mode between October last year and May 2019. The situation has improved since, with a liquidity surplus of ₹2.02 lakh crore as on October 14 from a deficit of as much as ₹1.7 lakh crore on December 26.
The banker cited earlier said the governor also stressed the need for quicker transmission of policy rates since that is required to give economic growth a push. “The governor discussed transmission of repo rate cuts into lower lending rates with regard to the latest cut of 25 basis points,” the banker said.
Most banks have linked their retail lending rates to an external benchmark and even lowered the marginal cost of funds-based lending rate (MCLR).