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April 3, 2017 | V.T. Pai - Ex. Director - Finance, MEDC

IDBE- arrest fallout- SBI says further restructuring of corporate loans to be decided through procedure under bankruptcy code 


Worries SBI-may play safe with trouble borrower arrest or former bankers who has opposed loan to Vijay Mallya’s Kingfisher Airlines will hold back India’s largest lender state bank of India from through life line to a trouble company and proactively resigning to give business house a second choice.


In the course of meeting that followed by cost week high profile arrest by CBI the state owned high street owned high street bank has chosen to see further restructuring corporate loans be decided under the bankruptcy code.


Banks offer come together to reduce interest rate to convert debt into equity and pro long loan repayment period to help borrowers to tide over difficult times and deal with business.


But with bankers who had approved loans to kingfisher taken to custody bank employee’s work to ring fence themselves against actions taken by the government enforcement agencies proving loans and alleged money laundry to Mallaya, A public transparent process of loan restructuring approval by National Company Law Tribunal (NCLT) can’t be questioned. It may nor-be the best solution but then we do not have many choices says SBI officials. LCLT posses orders for in solving re solution after creditors inhate proceeding under bankruptcy law.


Few days ago senior officials of the bank met partners of leading firm in Mumbai to explore the option of involving the bankruptcy code for some of the large stressed loan account. Not all banks particularly some other private lenders may concerned with SBI by then banks will soon met to discuss the way forward for the industry in the after of arrests.


Among other things decline with stressed borrowers and method of loan restructuring is likely to crop up. When bank CEOs meet daily early Feb- as managing committee members of Indian Bank association, a bank lobby under the bank ruptcy code loan restructuring plan is prepared by an insolvent practiced whose appointment is to be cleared by NCLT in 180 days of NCLT passing an insolvency resolution order the practitioner takes possession of the assets of the default co. takesoverthemanagementitasongoingcompanyandcollectsdatafromtheorganizationandbanksoperativeoffer75% ofthebanksagree. If the plan is rejected NCLT order liquidation process of the co. and insolvency practitioner is appointed as a liquidator. According to the legislation secured creditors can take procession of pledged and mortgage assets to sell the mandre convert part of their dues.


A bankruptcy proceeding is perceived as on revenue to force a fraud borrower to fall in line thought it is not the best way for banks to solve the most of their money says a senior lawyer.


Lenders know very well such powerful law is not entirely free from obstacles, indeed one of the borrowings co recently moved to high court to challenge the bankruptcy process without serving the notice on the borrowers. But it appears the immediate priority for banks to take shelter under the reputation and raise wall of immunity against action or law enforcements agencies. More so with the arrest of EX-IDBI chairman Yogesh Aggarwal and for other officials of the said bank. Just days after a DRT – ruled infavour of SBI- led lender’s consortium for recovering more than Rs.6200 Cr. from Mallaya.  


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