Battle Against Bad Loans Stepped Up: RBI To Target More Corporate Defaulters

The Reserve Bank of India (RBI) will wield the insolvency laws against more corporate defaulters to get to the bottom of the bad loan crisis. Cleaning up the bad loans mess that now top $180 billion, is top priority for the government, said Sanjeev Sanyal, principal economic adviser to the Finance Ministry.

Why urgently resolving the stressed loan trouble is important:

Mopping up bad loans will help the government plan capital infusion into state-owned lenders, Sanyal said. India plans to inject at least Rs 10,000 crore of capital into state-controlled lenders in the year ending March 2018 with a view to ratchet up credit growth.

State banks will need about Rs 80,000 crore in equity capital over the next two years to support credit growth and to meet the stipulations of global Basel III norms, said ICRA Limited, the local unit of Moody’s Investors Service.

“The clock’s already ticking - some cases are already before the National Company Law Tribune,” said Sanyal, promising, “More lists will be out in the next few months.”

The RBI, last week, identified 12 large debtors, who made up almost a quarter of the country’s bad debts of Rs 2 trillion, and ordered banks to initiate bankruptcy proceedings. The fast-track process in these cases will be completed within a period of 90 days as against 180 days in other cases, the government said.