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RBI meets bankers to take stock of bad debt

Mumbai, Oct. 17: The Reserve Bank of India today reviewed how far banks were able to use the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance 2002, to recover bad debts.

The progress made by banks on the NPA front came up for discussion today at a meeting between RBI deputy governor G. P. Muniappan and senior bankers. An RBI official said that the meeting, attended by bank chiefs, discussed the progress made by them with regard to the Ordinance, adding that it was only a routine affair with no decisions being taken.

Bankers are believed to have pointed out that they have achieved a reasonable degree of success with an increasing number of settlement offers now pouring in from cases that had turned non-performing.

Speaking to The Telegraph, a senior official from a leading private sector bank said the Supreme Court’s interim order staying sale of all assets was not a setback for lenders, as it gave them powers to take over a company, even though it barred outright sale to an interested buyer. “Therefore, the order is only fair and not an impediment for banks,” he added.

Under the Ordinance, banks have 60 days after issuing notices to errant companies following which, they can decide whether to either sell the assets of an errant company or change its management. This decision has to be endorsed by around 75 per cent of the lenders in terms of value.

However, worried borrowers have sought a distinction between wilful defaulters and those who are unable to pay.

Borrowers have also expressed their disappointment over a provision in the Ordinance which allows companies to contest the enforcement if they deposit 75 per cent of the amount due with a debt recovery tribunal. They pointed out that most of them may not be in a position to deposit this amount.

Apart from the Ordinance, today’s meeting also focussed on other issues that included progress regarding Kisan credit cards and retailing of government securities. Other points that figured were corporate governance and investment fluctuation reserve.

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