Willful defaulters must get used to idea of losing management: Rajiv Takru

Aug 14 2013, 01:01 IST
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Summary'The expectation that banks should take the tab for poor decisions of boards is uncalled for'

Coming out strongly against willful defautlers, financial services secretary Rajiv Takru said such people need to get used to the idea that they are likely to lose control or management of their companies if they default deliberately on dues outstanding to the banking sector.

There have been more and more cases of people taking advantage of the distress situation in the economy, by asking for more capital or easier repayment terms from banks, when the mistake is due to the bad judgement by the borrowers, Takru pointed out.

“The expectation that banks should take the tab for poor decisions of boards is uncalled for,” he said talking at a banking summit on Tuesday. He also told banks to be more alert when reporting cases of restructuring and non-performing assets (NPAs), noting it was possible to take care of such cases when they first start showing signs of slippages.

“You must have the flags going up early. Why must the flag go up after it becomes an NPA. Nobody becomes an NPA overnight. An account becomes an NPA after reasonable slippage,” Takru said.

Cumulatively, eight large banks including SBI are now sitting on a pipeline of restructured assets worth over R25,000 crore suggesting asset quality pressures in the industry are far from over.

Takru also said in case of stalled projects which were listed by the finance ministry, significant progress had taken place in moving the projects forward. He said that in a large number of cases, there has been a vast improvement in the last two months.

“Unfortunately, this is not something where we see the effects from tomorrow. The effects on economy in my view would take at least six to eight months," Takru said.

Takru also said that recapitalisation of public sector banks would happen withing the current quarter.

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