The Hindu Business Line
LETTERS TO THE EDITOR
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Back to square one
With reference to the editorial ‘A huge setback’ (April 3), the IBC 2016 was launched with much fanfare to solve recovery problems of banks. Apprehensions were expressed even at the time of its launch that it might get mired in legal tangles and go the way of its predecessors such as DRT and SARFAESI. The worst fears appear to be coming true.
The Supreme Court order however has not barred the banks from taking actions under insolvency proceedings. What is struck down are the mandatory provisions in the RBI circular that cases with default above ₹2,000 crore should be taken to NCLT under IBC if no resolution plan is approved by lenders within 180 days of default. The fact remains that in the absence of a mandatory RBI framework, no banks would be able to take a professional call on initiation of insolvency proceedings in the face of pressure from political masters to defer action against their cronies. Unless a firewall is built around the banks to protect them from outside influence NPAs would soon get pushed once again under carpets of evergreening . Manohar Alembath
With reference to the various articles and editorial on ‘apex court ruling RBI Circular dated 12th February, 2018 as ultra vires’, the RBI’s over-anxiety to clean up the banks’ balance sheets did it in. The regulator’s action to withdraw old restructuring schemes like CDR, 5/25 refinance scheme, SDR, S4A was within its powers and fully justified, as there was clear evidence that the banks had used the schemes increasingly to ever green their assets and avoid provisions thereon. But the insistence that resolution plan shall be drawn within 180 days from the date of default, even if it is for one day and if not drawn shall be referred under IBC was a bit too much. Strict implementation of NPA norms, which address special mention accounts and default delay for changing asset classification, and the stipulation that any kind of restructuring will result in ‘down-gradation of asset’ are good enough to achieve transparency in banks’ balance sheets.
It is also doubtful whether the accounts referred to the NCLT will get any respite, as they would have been classified as NPAs any way, for want of equivalent credits to meet the interest and instalments that became due in the relevant period. V Viswanathan
With reference to editorial “A huge setback” (April 3), the Supreme Court while delivering the judgement relied on Central Government notification dated 05.05.2017, wherein Section 35AA could only be in respect of specific defaults by specific debtors. Apart from the interpretation of Sec. 35AA, two viewpoints could emerge. (1) Whether as a majority shareholder in public sector banks, does not such notifications directing the central bank to toe a specific line on the part of central government involve “conflict of interest”? and (2) Does not such notifications lead to interfering in management of commercial banks by the RBI especially in critical areas like bad loan recovery process under mining its independence? It has also put a question mark on RBI doing away with old restructuring schemes. Are we back to square one on recovery efforts?
Poor monsoon again
This year’s first prediction of monsoon paints a grim picture with forecast for another year of below normal rainfall. This should have set the alarm bells ringing, but the country seems to be preoccupied with elections. Several regions are already reeling under water stress and this will get aggravated. The burden falls disproportionately on the poor, women and the aged.
Citizens from all walks of life will have to pitch in with water saving measures. Farmers must stop flood irrigation and the resulting wastage. Urban citizens too need to take many measures. Schools and colleges must spread the message among students and arrange awareness drives.
The Indian standard of 140 litres (7-8 buckets) per person per day is way too high and a luxury we cannot afford. We must learn to do with much less. The time to act is now.