Twin Balance Sheet Problem Nearing Resolution: ASSOCHAM
The long-pending problem of twin balance sheets of banks and highly leveraged corporate firms is likely to be resolved reasonably in the forthcoming quarters, the ASSOCHAM said on Sunday.
New Delhi [India], Apr. 15 (ANI): The long-pending problem of twin balance sheets of banks and highly leveraged corporate firms is likely to be resolved reasonably in the forthcoming quarters, the ASSOCHAM said on Sunday.
In addition to this, the chamber opined that the process of resolution of companies under the Insolvency and Bankruptcy Code, 2016, would pick up the pace in the coming months.
"Our own assessment is that it would take another six to nine months before the banks see revival of confidence to lend afresh as they would then see reasonable amount of their non-performing assets (NPAs) get unlocked through a resolution. Besides, with sales growth expected to witness a revival, the ability to service debt would improve considerably," the chamber said.
Meanwhile, ASSOCHAM Secretary General D S Rawat urged the Reserve Bank of India (RBI) to relax the norms proposed in its February circular as the same were quite harsh both on the bank and borrowers.
"These norms would aggravate rather than solving the problem of NPAs; at this point of time, both the lenders and borrowers need to be given a confidence and policy support. As long as there is a willingness to resolve the problem, all support must be extended. After all, as is evident from the stressed assets in steel and cement, there is a huge rush for acquiring the same. This shows there is a tremendous inherent value proposition and these assets can be turned into first class performing assets within a few years," he said.
Rawat reiterated that in the coming months, the IBC process would see some refinement, based on the experience gained so far, even as the capacity to handle the cases would get built up in an institutionalised manner.
"Be it a consortium of creditors, debtors, insolvency professionals, company law tribunals or even higher courts, they would all gain useful experience and would have some successful precedents to follow, going forward," said Rawat.
Within India Inc, the ASSOCHAM highlighted the presence of a growing realisation that in case the projects were stuck for reasons, there was a legitimate exit route available before the creditors and promoters. Therefore, the chamber said that the IBC system needed to be supported and made the best of global standards with an active involvement of the government, regulators, lenders, borrowers and the judiciary.
"Post the clean-up; the entire corporate governance structure should see a transformation, raising the standards of internal controls, external oversight, disclosure and authority of the boards," it added.
Earlier this month, Ministry of Corporate Affairs Secretary Injeti Srinivas noted that individual borrowers would be brought under the ambit of the IBC in due time.
With regards to NPAs, Srinivas said Rs 9.5 lakh crore was locked up along with 15 percent of public sector bank exposure and added that it was critical to arrest the trends for the sake of the economy.
On a related note, the Union Cabinet in February gave its ex-post facto approval for the amendments that were made in the IBC enabling clarity and prohibiting certain persons from participating in the resolution process. (ANI)
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