India may use bankruptcy laws against more corporate defaulters
NEW DELHI: India’s central bank plans to use insolvency laws against more corporate defaulters to speed up resolution of the country’s bad loans that have swelled up to US$180 billion (RM768.6 billion).
“The clock’s already ticking — some cases are already before the National Company Law Tribune,” said Sanjeev Sanyal, principal economic adviser to the finance ministry.
“More lists will be out in the next few months.”
Cleaning up India’s stressed loans was the biggest priority of Prime Minister Narendra Modi’s government, said Sanyal.
The Reserve Bank of India (RBI) last week notified 12 large debtors against whom it had ordered banks to use bankruptcy laws to resolve two trillion rupees (RM132.4 billion), or a fourth, of the country’s bad debts.
The process in these cases would be completed within 90 days compared with 180 days in other cases, said the government.
For Modi, getting rid of the bad loans was crucial to reviving investments in Asia’s third-largest economy to meet his election pledge of adding jobs before the 2019 elections.
As concerns about slowing growth grow louder, India needs to resolve its debts mess and strengthen its lenders.
Last month, the government gave the RBI new powers by amending the Banking Regulation Act. That enabled the central bank to order lenders to initiate insolvency proceedings against defaulters and create committees to advise banks on recovering non-performing loans.
Using the bankruptcy law would ensure company founders and lenders renegotiate terms to resolve stressed loans within 180 days.
Resolving troubled loans would help the government plan capital infusion into state-owned lenders, said Sanyal.
India plans to inject at least 100 billion rupees of capital into state-controlled lenders in the year ending March next year as it seeks to ratchet up credit growth. Bloomberg