Loans of over Rs 1.8 trillion, for which agreement has been signed by banks, are likely to be referred to IBC.
The famous 'tareekh pe tareekh' dialogue from the Hindi movie Damini captures where we are now.
Last fortnight, State Bank of India Chairman C S Setty lifted the veil on a subject long spoken of in corporate corridors: Why can't our banks finance mergers and acquisitions (M&As)? Change is in the air: Indian Banks' Association (of which Setty is the chairman) is to "make a formal request" to Mint Road to make way for it. Thus far the exclusive turf of foreign banks even though its funding remains offshore - as in, it's not on these entities rupee-book (and a few select shadow banks) - a most lucrative segment in the investment banking suite, M&As, will be homeward-bound.
The banking regulator is seeking an early exit mechanism for private banks under Prompt Corrective Action.
Moratorium was only a temporary reprieve to borrowers affected by the pandemic, adding that a longer moratorium period exceeding six months can impact credit behaviour of borrowers and increase the risks of delinquencies post resumption of scheduled payments.
To cut its debt, promoter Kapil Wadhawan and promoter group Wadhawan Global Capitalhave resorted to measures such as sale of assets of group companies as well as securitisation of retail assets of DHFL to bring in liquidity.
'The Insolvency and Bankruptcy Code cleans up non-performing assets and puts companies in capable and credible hands.'
DHFL has been generating funds through various means and has exited from its subsidiary units to tide over the current financial crunch.
Lenders can now review a borrower account within 30 days of default. Earlier, the banks had to start resolution within one day of default.
As a result of this moratorium, individuals' EMI payments of loans taken will not be deducted from their bank accounts, providing much needed liquidity to borrowers whose income has been disrupted due to the lockdown till May 31.
'Without appropriate supervisory constraints in place, banks are in a position to delay the recognition of losses and engage in ever-greening or zombie lending, which is essentially the rolling over of debts of unviable borrowers that would have otherwise defaulted,' points out RBI Deputy Governor Viral Acharya.
For willful defaulters, change in ownership accompanied by punitive action against the defaulting management is the way to go.
Thanks to the recapitalisation by the government and measures taken by the central bank, collapse of any large housing finance company won't pose as big a risk as it had six months ago.
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