Guarantors of Bank Loans : You were warned

 

 

 

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 cases of " cheque bounces " , you will obtain from the courts , " Non Bail-able Warrants " against such directors

 

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 happen to be close relatives / friends )

 

>   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 " Bank Re-Capitalization "

 

>  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 Deficit ? )

 

    ----------------------------------

 

 

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 " Skeletons in the Cupboard " will come tumbling out !

 

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 the lenders

 

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 robbers ? )

 

 

 

 

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 , in a dignified way !

 

  -------------------------------------------------------------------------- 

 

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 ( takers  &  givers ) , the moment any repayment

 instalment  becomes overdue by ONE DAY ?

 

And automatic / instant revoking of PASSPORT , without having to approach

Supreme Court  ? “

 ---------------------------------------------------------------------------------

 Daylight Robbers ? Some Yes !............... 27 Dec 2022

 

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.

 

Hurry – subject to the Ten Commandments !

 

 

Context :

Expedite pending trials against MPs, MLAs: SC     ……….. HT  /  10 Nov 2023

Extract :

The Supreme Court on Thursday issued a string of directives to expedite pending criminal trials against the members of legislative assemblies and Parliament

“ Of these ( 5,175 ), cases that are pending for more than five years are as many as 2,116, which figure is more than 40% of such pendencies. This is a large number,” lamented the bench

 

The bench directed :

 

( 1 )    Chief justices of all 25 high courts across the country to register cases on their own motion (suo motu)

          to monitor the early disposal of criminal cases pending against the members of Parliament and

          legislative assemblies

 

( 2 )   These cases may be heard by the special bench presided by the chief justices or benched assigned by

          them.

 

( 3 )   The high court may issue such orders and/or directions as are necessary for expeditious and effective

         disposal of the subject cases.

 

( 4 )   The special bench may consider calling upon the advocate general or the public prosecutor to assist the

          court

 

( 5 )   The principal district and sessions judge may be asked to send periodical reports on status of such

          trials.

 

( 6 )   The designated trial courts shall give priority to criminal cases against MPs and MLAs punishable with

          death or life imprisonment and then to cases punishable with imprisonment for five years or more.

          Offences such as murder, rape of minor, kidnapping for ransom and mutiny can entail death penalty for

          convicts.

 

( 7 )   The trial courts shall not adjourn the cases except for rare and compelling reasons.

 

( 8 )   The learned chief justices may list cases in which orders of stay of trial have been passed before the

         Special Bench to ensure that appropriate orders, including vacation of stay orders are passed to ensure

         commencement and conclusion of trial

 

( 9 )   High courts shall create an independent tab on their websites providing district-wise information about

          the details of the year of filing of such cases, their status and other relevant details.

 

( 10 )  The special bench may pass such orders or give such additional directions as are necessary for early

           disposal of the subject cases

 

My Take :

 

2019 : Nightmare Year ?.... ……………………………….12 Dec 2017

 

Extract :

 

I assume that ,

 

 

·     It will be May 2018 , by the time these Special Courts start working – more than 4 YEARS after the Supreme Court directed the Centre to set up these courts

 

·     These “ Super Efficient “ courts will refuse to grant any “ Postponement Dates “ to the accused and not only conclude within ONE HOUR ( whether the accused was guilty or not ) but also announce the VERDICT , on the spot ( remember , 4.6 cases / day ? )

 

·     There cannot be any “ Appeal “ against the judgements of these special courts

 

·     Some 365 MPs / MLAs ( out of those 1581 accused ) will be found GUILTY

 

 

·     The Speakers of the Lok Sabha / Rajya Sabha , will get court order copies within 7 days

 

·     The Speakers will disqualify , within 7 days , those MPs / MLAs who are declared guilty and who have been handed out sentences of 5 years or more

 

·     The Election Commission will receive these “ Disqualification Notifications “ in 7 days

 

·     The Election Commission will announce re-election dates within 30 days for seats falling vacant

 

·     These re-elections will start from Dec 2018  and stretch throughout 365 days of 2019

 

 

·     To ensure proper / timely availability of Election officers / police / EVMs / polling booths / presiding officers / school-teachers / transport etc , spread over 28 States , no more than ONE ELECTION will be conducted PER DAY ( - for each of 365 days of 2019 ! )

 

 

With regards,

Hemen Parekh

www.hemenparekh.ai  /  12 Dec 2023

 

And , when questioned about my suggestion , ChatGPT replied as follows :

 

Thank you for sharing the information and your perspective. It seems like you are proposing an accelerated process for the trials of cases against MPs and MLAs, leading to quick disqualification and re-elections. Your suggestion involves the use of "Super Efficient" courts and the implementation of a timeline for various stages of the process.

Now, regarding the use of AI tools to expedite these cases, it's important to note that AI can indeed play a role in streamlining legal processes, but there are also challenges and considerations to be taken into account:

1.     Case Management: AI can be used for efficient case management, helping courts keep track of the large volume of cases. It can automate scheduling, document management, and other administrative tasks.

2.     Predictive Analysis: AI algorithms can analyze case data to predict case outcomes, helping courts prioritize and focus resources on cases with a higher likelihood of guilt. This could potentially assist in expediting cases.

3.     Virtual Courts: The Supreme Court's directive to switch over to E-Courts aligns with the idea of virtual courts, and AI can enhance the virtual court experience. This includes features like automated transcription, virtual assistants for judges, and AI-driven case analysis.

4.     Data Visualization: Creating independent tabs on high court websites for district-wise information, as suggested in the directives, could benefit from AI-driven data visualization tools for a more accessible presentation of information.

However, it's crucial to consider the ethical implications, potential biases in AI algorithms, and the need for human oversight in legal proceedings.

Additionally, the legal system involves complex decision-making that may not be fully replaceable by AI.

Your proposed timeline and processes assume a high level of efficiency and promptness in the legal system. Implementing such changes would require careful planning, infrastructure development, and addressing potential challenges.

In conclusion, while AI tools can contribute to expediting legal processes, they should be integrated thoughtfully, considering legal, ethical, and practical aspects.