FE Editorial : Debt recovery takes off?
The Financial Express: Feb 14 2013, 00:32 IST
It’s just as well that lenders to Kingfisher Airlines (KFA) have decided to start recovering some of their dues from the bankrupt airline; given that the consortium holds shares of United Spirits Ltd, it should get some Rs 6,500 crore against dues of R7,000 crore. Indeed, it would seem the consortium gave the KFA management way too much time to come up with an equity contribution. The trick in banking is to be able to assess the credibility of a promoter, as much as it is important to gauge his creditworthiness. In the case of Vijay Mallya, it never seemed like the liquor tycoon would be able to raise equity in KFA and the banks could have pulled the plug—ICICI Bank did get out by selling its exposure—much earlier. But bankers in India tend to be liberal with their customers—as seen from the large amounts of loan restructuring—not always cutting off credit lines in time. Moreover, they’re unable to get promoters to toe their line; for instance, despite sitting on large sums of restructured assets of real estate developers, after the global financial meltdown, bankers were unable to get even one property player to sell any significant amount of inventory. One reason for this, of course, is that banks have been allowed to get away with not classifying restructured loans as non-performing assets (NPAs) and also with very liberal provisioning requirements. It was only a few months ago that RBI upped the provisioning for restructured assets to 2.75% and it
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