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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?

Srinivasan Velamur


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.

V Vijaykumar


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