Launched amid much fanfare, the newly enacted IBC (Insolvency and Bankruptcy Code) was supposed to be a gamechanger to eradicate NPA malaise in India. Reserve Bank of India ('RBI'), Government, Banks, professionals – all went gaga over it as if a final solution has been found.
After deliberating for long, RBI identified a group of 12 corporate NPAs to be referred to the National Company Law Tribunal NCLT. The rationale was that apparently, the bankers had exhausted all other options to recover their dues.
However, even before the insolvency case could be admitted by NCLT against Essar Steel (one of the said 12 accounts owing about Rs. 2 lakh crores to the lenders), the concerned corporate moved Gujarat High Court challenging RBI's selection criteria for identifying the said 12 accounts.
Needless to say, the defaulters are too happy to prolong the game by using any trick that serves their purpose. They cannot be expected to facilitate the process or be cooperative.
The move comes as a big setback to the proposed regime and certainly will derail the resolution process. If defaulters were to dictate or given an option which cases are to be referred to NCLT, the whole exercise is futile.
Indian banking system is already reeling under a humongous NPA burden and this move does not come in good taste. Had the 12 defaulters been serious, had their businesses been turning around, there would have been progress in the years gone by.
Such actions on part of lenders will nullify all the hard work gone in considering and enacting the IBC and encourage other promoters to engage in dilatory tactics, which they are quite pro at.
The poorest of Indians (read farmers) need loan waivers, the biggest borrowers (corporates) are defaulting and not letting the IBC regime become effective. How long can the tax paying, honest, compliant middle class Indians support our banking system ?
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