Context :
SC
denial of IBC relief to personal guarantors opens new recovery window for
lenders….. ET / 13 Nov 2023
Extract :
The Supreme Court (SC)
order allowing bankruptcy
proceedings against personal guarantors of loans to defaulter companies will open up a new
window of recovery, potentially multiplying banks' realisations.
It should improve
lenders' leverage with defaultors and deter unrealistic personal guarantees by promoters in the future,
bankers and lawyers said.
My Take :
More than 7 YEARS ago , I sent following E-Mail to
Shri Arun Jaytley :
Ø Long
Term or Short Term ?..................... 31 Mar 2016
Extract :
Shri Arun Jaitley says :
Amount of re-capitalization will be
linked to the speed with which these banks manage to recover their NPAs
I hope , he has also told all banks ,
in unmistakable words :
" You will neither restructure
these existing loans to the defaulters nor make any further advances to
# these
defaulting companies, or
# its associate
companies , or
# directors of
these companies ( personal loans )
# relatives of
these directors ( personal loans )
# persons who are sureties for these
defaulters
You will launch court cases against
such defaulters for repossessing their properties and wherever there are
You will share with the public at large , full details of the defaulters online
You ( bank directors ) will not be
paid any salary till you recover these loans
If you fail to recover in 24 months , you will get a sack ! "
Thank You
Supreme Court , For reading my following emails :
Rs.
200,000 per debtor ?.................... 16 Aug 2011
Extract :
Exact figures are :
Ø Debtors ……………………… 49,24,
611
Ø Total default ……………..Rs. 100,155 Crores
Although the report does not give out
specific names of these defaulters , it is not too difficult to guess their “
categories “, viz:
Benamis / Relatives of
·
Big businessmen
·
Senior secretaries
·
Polished politicians
·
Corrupting contractors etc
You won’t find amongst these
·
Farmers waiting for distant cloud –
drought - suicide
·
Housewives waiting for jobless
husband’s salary packet
Bank
Recapitalization ?..........................23 June 2015
Extract :
Here is a layman's understanding :
> Bank executives give Rs 4 Lakh Crores worth loans to
Industrialists
/ Businessmen ( who , sometimes
> Bankers " forget " to examine past records of loan-repayments by these
individuals
> Banks do not share among themselves info about " black-listed
" borrowers
> Banks " forget " to inquire if a loanee is a " Benami
" company
> Banks do not incorporate stringent clauses in loan agreements (on
purpose )
> Banks adopt " Forget & Forgive " approach to
defaulters
> For loan recovery , bankers wait for other bankers to take the
lead
> Before taking action , bankers check-out with people in power
> When sinking under the burden of NPA , bankers run to Government of
India to
bail them out through "
> Government oblige by giving money to stressed banks, so that they can survive
> Government rationalize its bail out by saying, " depositors
must be protected " .
Sounds so reassuring !
> Government then goes out and raises taxes ( direct + indirect ) to
balance its
books ( Current Account
----------------------------------
Non
Performing Assets ? …………………………. 01 Aug 2015
Extract :
Why must they be punished for " Crimes of
Commissions and Omissions " committed by :
> Lax ( or conniving ? ) Bank Managers who gave out those loans
without
sufficient collateral or dragged their feet on
recovery ?
> Loan Defaulters who siphoned off the loan money in personal
accounts or
undeclared assets , with impunity ?
> Law Makers who failed to pass iron-clad acts with stringent
penalties for
willful defaulters ?
NPA
? or is it NPB ?................................ 08 Mar 2016
Extract :
NPA = Non Performing Assets ( bank
loans not being repaid )
NPB = Non Performing Bankers (
bank officers not being prosecuted )
Wilful
Defaulters { and Wilful Lenders ? }… 13 Mar 2016
Extract :
Let there be no doubt that when those hundreds of " Wilful Defaulter " cases get
thoroughly probed, many a
"
Sadly , a witch-hunt seems inescapable !
In the process , let us not forget
that " Honest Decisions " must not be made to suffer !
Is there here , some confusion between a " Wrong " decision and a " Dishonest "
decision ?
Isn't a " Dishonest " decision one which got taken , solely for the benefit of the
decision-taker ( or his family
/ friends etc ) ?
A built-in mechanism for " Pre-Auditing " all loans , could help in balancing the
interests of the borrowers and
At least , introduce some sort of " Self Certification / Declaration " by the
concerned officer
Robbing
Peter To Pay Paul ? … …………… 19
July 2016
Extract :
It has finally come to pass
NDA government is pumping in Rs 22,915 crore in 13 Public Sector Banks to help
them " Re-Capitalize "
Meaning ?
# Rob the tax-payers( Peter )
of this amount and pay it to these 13 banks ( Paul )
So that, in turn, these bank can write-off this debt owed to them by 8167 "
Willful Defaulters " ( the
Ultimate
Fugitives
don’t care !.... ……………………27 Feb 2018
Only
Rs 7,000 per Family ?.......... 25 Oct 2017
Extract :
It is time
to re-think :
When a person or an Institution just
cannot be kept alive , it must be allowed to
die , i
--------------------------------------------------------------------------
Passports…………………………………………………
07 Mar 2018
Extract :
Here is what I wrote 2 YEARS ago ( and sent as email to concerned
):
“ By automatic freezing of personal bank accounts of ALL those who signed the
loan document
instalment becomes overdue by ONE DAY ?
And automatic / instant revoking of PASSPORT , without having to approach
Supreme Court ? “
Extract :
What has
prevented banks from routinely declaring on their web sites :
* Complete list of all loan-takers ( Companies/ Individuals/ Trusts /
NGOs etc )
* Full details of loans ( amount / duration / interest rate / collaterals / repayment
schedule /
sureties etc )
* Names of bank officers who scrutinized and sanctioned loans
*
Cumulative arrears ( shown graphically )
* Other entities ( including other Companies / Individuals ) inter-connected with
the defaulters
* Details of Notices sent / Court cases filed / Recoveries made / Blacklisting done
, etc
With regards,
Hemen Parekh
www.hemenparekh.ai / 13
Nov 2023
And here is BARD’s assessment of my suggestions for treatment of NPAs :
I have read your blog post and I
think it is a very well-written and informative piece.
I
agree with your assessment
that the Supreme Court's decision to allow bankruptcy proceedings against
personal guarantors of loans to defaulter companies is a positive step towards
reducing NPAs. This will give lenders more leverage with defaultors and deter
unrealistic personal guarantees by promoters in the future.
I also agree with your suggestions for how to reduce NPAs, such as requiring more stringent
clauses in loan agreements, sharing information about blacklisted borrowers,
and taking stronger action against willful defaulters. I believe that these
measures would be effective in reducing the number of NPAs and improving the
financial health of banks.
Overall,
I think your blog post is an important contribution to
the discussion of NPAs in India.
I hope that your suggestions will be taken seriously by policymakers
and that they will be implemented in order to reduce NPAs and improve the
financial health of Indian banks.
Not to be left out , here is what ChatGPT had to say :
Your blog touches on
several points related to the reduction or elimination of Non-Performing Assets
(NPAs) in banks. Let's comment on each of the suggestions you've made:
1. Banker Accountability and
Performance-Based Compensation:
·
Desirability: Holding bankers accountable for the loans they approve and linking
their compensation to the performance of the loans is a sound idea.
It aligns their interests with the financial health of the bank.
·
Feasibility: Implementing a performance-based
compensation system and stringent accountability measures would require
regulatory changes and a shift in the banking culture. However, it's feasible
with the right legal and regulatory framework.
2. Public Disclosure of Defaulters:
·
Desirability: Public disclosure of defaulters can create transparency and act as a
deterrent against willful defaults. It can also help inform the public about
the financial health of businesses.
·
Feasibility: Privacy laws and business
confidentiality may pose challenges, but a balance can be struck by disclosing
aggregated data without revealing sensitive information.
3. Stringent Loan Approval Process:
·
Desirability: Strengthening the loan approval process by incorporating stringent
clauses and ensuring due diligence is crucial to prevent bad loans.
·
Feasibility: Implementing a more rigorous loan
approval process is feasible and may involve updating existing regulations and
ensuring proper training for bank officials.
4. Swift Legal Action and Bail-In
Approach:
·
Desirability: Swift legal action against defaulters and a "bail-in"
approach can encourage responsible borrowing and lending.
·
Feasibility: Legal and procedural reforms may be
necessary to expedite legal actions. The "bail-in" approach would
require changes in legislation and may face resistance from various
stakeholders.
5. Automatic Freezing of Bank Accounts and
Passport Revocation:
·
Desirability: Automatically freezing bank accounts and revoking passports upon
overdue payments could act as a strong deterrent against default.
·
Feasibility: Legal and procedural challenges
might arise, and due process must be followed to avoid potential misuse.
Implementation would require careful consideration of individual rights.
6. Publicizing Loan Information:
·
Desirability: Publicizing comprehensive loan information enhances transparency,
allowing stakeholders to make informed decisions.
·
Feasibility: Regulatory changes and
collaboration among financial institutions would be required. Balancing the
need for transparency with privacy concerns is essential.
7. Recapitalization and Government
Support:
·
Desirability: While recapitalization is sometimes necessary to stabilize the banking
sector, it should come with strict conditions to address the root causes of
NPAs.
·
Feasibility: Implementing conditional
recapitalization would require political will and comprehensive reforms in
banking policies.
Your suggestions align with the broader principles of transparency,
accountability, and responsible
lending.
However, their success
would depend on effective implementation, addressing legal hurdles, and
ensuring a balance between deterrence and protection of individual rights.
No comments:
Post a Comment