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Business Economy


Key objective of NPA resolution not liquidation of assets but to save businesses: Jaitely

Mumbai, Aug 19 (UNI) Union Finance Minister Arun Jaitley today said the ultimate objective of non-performing assets (NPA) resolution is not liquidation of assets but to save these businesses, with or without help of new partners or new entrepreneurs, and to ensure that these valuable assets are preserved.
Addressing a summit on insolvency organised by industry body Confederation of Indian Industry (CII) here, he explained the rationale for the new Insolvency and Bankruptcy Code (IBC) and said this was necessitated due to the failure of Debt Recovery Tribunals (DRTs) to effectively perform their duty.
The less effectiveness of DRTs led to enactment of the new law, the minister noted.
When enacted, the Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act had succeeded in getting down NPAs drastically in the initial two-three years, he said.
Mr Jaitley also said the new regime, under the IBC, has significantly reversed the defaulter-debtor relationship and noted, "We lived in a system for many years which protected debtors and allowed assets to rust away."
"The old regime by which the creditor would get tired chasing the debtor and end up recovering nothing, is now over. If a debtor has to survive, he will have to service his debt, or he will have to make way for somebody else. I think this is the only correct way, by which businesses would now be done, and this message has to go loud and clear," he said.
Calling for speedy and time-bound resolution of the bad loans issue which has become a major regulatory overhang, the Finance Minister expressed hope that the mandated timelines will be adhered to so that implementation is effective.
Expressing concern over gross NPAs having crossed 9.6 per cent and the stressed loans ratio over 12 per cent as of March 31, Mr Jaitley said following this, the Reserve Bank of India has named 12 of the largest defaulters in June, which together owe more than Rs 2.5 trillion to banks.
Almost all of them are under NCLT (National Company Law Tribunal) now and may face liquidation if the promoters fail to come up with a sustainable resolution and capital infusion, he pointed.
These 12 companies are from the list of 500 largest defaulters that RBI has drawn up, he added.
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