oppn parties Loans Gone Bad: What is The Way Out?

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  • Allahabad HC said that the UP Police is acting as law unto themselves as they detained a person unlawfully even before his arrest
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  • Neha Bora was subsequently released and Dipke is to appear before a magistrate today at noon
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  • Finance Minister Nirmala Sitharaman said India's trade imbalance with China was growing sharply and attributed the problem partly to restrictions on Indian goods and services entering the Chinese market. China subsequently said it was ready to work with India to address mutual economic and trade concerns; India's trade deficit with China reached $69 billion in the first half of FY2026–27, up 27% year-on-year
  • Indian equity benchmarks extended their recovery on Friday, with the Sensex rising 413.66 points to close at 74,729.27 and the Nifty 50 gaining 148.80 points to settle at 23,146.15. Information technology shares, including Tech Mahindra, Infosys and TCS, helped lift the indices
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  • Indian wrestler Komal won bronze in the women's 59 kg category at the Under-23 World Wrestling Championships in Las Vegas, defeating Kazakhstan's Viktoriia Khusainova 7–2. Fellow Indian Amruta Pujari advanced to the women's 72 kg final after recording two pinfall victories
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  • The Supreme Court of India upheld the Bombay High Court's decision quashing the 2020 write-off of ₹8,415 crore in additional tier-1 bonds issued by Yes Bank (Yes Bank). The court ruled that the bank's administrator lacked the authority to extinguish the bonds under the final reconstruction scheme, strengthening bondholders' claims
  • The Supreme Court issued notices to the Election Commission of India, Delhi Police and opposition leaders, including Rahul Gandhi and Akhilesh Yadav, in separate petitions concerning electoral-roll revision and protests held in Delhi on October 10–12. The court also directed the preservation of CCTV footage linked to allegations of police excesses
  • The Supreme Court ruled that a person converting from Hinduism to Islam cannot automatically claim backward-class reservation benefits in the new religious community solely on the basis of their previous caste status. The judgment upheld the Madras High Court's decision striking down a 2024 Tamil Nadu government order that permitted such certification for specified communities
  • The Election Commission of India ordered a Special Summary Revision of electoral rolls in 14 states and three Union Territories, using January 1, 2027, as the qualifying date for voter eligibility. The draft rolls are scheduled for publication on November 12, claims and objections will be accepted until December 11, and the final rolls are due on January 4, 2027
Delhi HC refuses to ban CJP's Tiranga rally at Central Park in Connaught Place today /////// Police says will control and regulate it /////// NDMC closes the park for the public on Friday and Saturday
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Loans Gone Bad: What is The Way Out?

By Ashwini Agarwal
First publised on 2017-05-09 16:43:08

To tackle the non-performing assets (NPA’s) of banks, the government is working on three fronts. The first is the recent ordinance that amends section 35 of the Banking Regulation Act. The second is to amend the Prevention of Corruption Act in order to insulate bank employees against prosecution for decisions taken in settling a bad loan that might involve interest rate cut or a haircut. The third is the strict implementation of Bankruptcy Act. But taken together, will these measures work?

The first measure empowers the RBI to intervene if banks are not able to come at a settlement. It allows the RBI to give the banks a 60-90 day window to sit with the defaulters and thrash out a way through which the loan is recovered instead of just sitting on the books. If the banks are not able to do that within the window, the RBI will step in. There are several large defaulters (Bhushan Steel Rs 47000 cr and Essar Steel Rs 45000 cr, to name just two) who need immediate attention. But one thinks that neither their assets nor the position of their business permits the repayment of even a small part of the loan. What happens in that situation?

There are several big loans that have little or no chance of being recovered. The ideal way would be to recover what is possible and write the rest off. Instead of continuously keeping the books of banks stressed, a one-time hit and subsequent recapitalization is the better way. Simultaneously, the parameters for advancing loans must be so tailored that such huge loans to single entities are not given at all. It will hamper growth, but it will not result in money going down the drain. The promoters do not lose anything as they take out their contribution in various ways even before the project takes off. It is the banks who are left holding the bag.

However, the current measures are a step in the right direction. The government must now think of further hard measures to counter the menace. Talking to promoters and restructuring is all very good, but in the end money needs to be paid. This situation has largely arisen due to favouritism on part of politicians and corruption on part of bankers. Unless these twin issues are tackled effectively, there will be more bad loans and no amount of legislation or policing will stop it. picture courtesy: moneycontrol.com

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