This time around, for instance, her bank will take more care while assessing the promoters equity contribution. To begin with we would not lend unless we are sure all the project clearances are in place, Bhattacharya told FE in an interview.
Secondly, regarding the equity, I would like to know the colour of the equity, where it is coming from and have a plan B in place. For instance, the plan may be to raise money from the capital market, but the markets may not play ball. If the promoter says hes going to bring in equity from his other group companies, we will do a check of the cash flows to see if he has that kind of money, the SBI chairman observed.
Bhattacharya added that SBI will go to the extent of checking with other lenders to the promoters to see whether they are comfortable with additional borrowings. These are the learnings from the last cycle and the due diligence will be greater in future, she said, pointing out that some of the models that were put in place had not worked. The SBI chairman feels, however, that the early warning system put in place by the regulator would help alert banks about potential non-performing assets.
Bhattacharya said that banks have asked the government to ensure that debt recovery mechanisms such as Sarfaesi work faster than the five or six years that it normally takes. We are asking the government to give the wilful defaulter status more teeth, the SBI chief said.
SBI, she said, has been persuading promoters to sell assets to bring down their loan outstandings, where needed. We do tell all large promoters to sell assets, if necessary. We do it with all the big groups, Bhattacharya said. Meanwhile, shes hopeful that a recovery in the economy will see CDR exits.
Once bitten ...
* No lending to infra project unless all clearances got
* Where is the equity for the project going to come from; if the markets dont deliver, will it come from group companies Do a check on groups cash flows
* Check with other lenders to see if they are OK with the idea of additional loans
* Requesting government to speed up Sarfaesi, give more teeth to wilful defaulter status