Mumbai, March 23: Banks are engaging global consultants to manage non-performing assets (NPAs), which have scalded their balance sheets.
Entities such as New York-based Alvarez & Marsal now have a growing roster of bank clients, which are trying to implement strategies such as appointing interim managers to turn around the bad assets.
Banks are hiring experts not only to bring down bad loans, but also to ensure that there is no fresh creation of NPAs.
Alvarez & Marsal specialises in turnaround management, performance improvement and business advisory services. It has been present in India since 2008.
Once appointed by a bank, Alvarez & Marsal focuses on three areas — generating cash flows, optimising costs and concentrating on profitable revenues and growth, senior director of the firm Nikhil Shah told The Telegraph.
He said the process might entail the appointment of interim management such as a chief restructuring officer, whose term is generally fixed and lasts till the turnaround is completed.
Though the concept of interim management is fairly new in the country, it is well established in developed markets such as the US and Europe.
Shah did not disclose the number of such cases referred to the firm. However, it is believed that they have been mandated by both public and private sector banks.
According to Shah, it takes around 4-8 weeks to prepare a restructuring plan. The entire process, including improving the company’s cash flow, may take 3-12 months.
Bank NPAs have been on a rise as the domestic economy continues to pass through a slowdown phase. According to data released by NPAsource.com, gross NPAs of 40 listed banks shot up 35.2 per cent, or Rs 63,386 crore, for the nine months ended December 2013 to cross the Rs 2.4-lakh-crore mark. This jump was much higher than the 27 per cent rise in the first six months of the fiscal.
BAD LOAN WORRY
Problem: Gross NPAs of listed banks more than Rs 2.4 lakh crore
Solution: Appoint specialised
agencies to turn around bad assets. On their advice, temporary
appointments at senior levels
are being made to fight NPAs
Other solutions: Debt recast, asset sale of defaulters, sales to asset