Bad Loan Policy moving right By - Yasmin Gill
Profile Know your educator Yasmin Gill L9M 4-9 Yasmin Gill Educator ine October 2016 Referral Code yashi g0/Qualfied for UPSC mains/Rank 24th in Punjab PCS 160k 3 Edit Profile BE (EEE) from UIET, PU in 2014 Need help? Chat with us Educatot Status Active Qualified for UPSC Mains State Rank 24 in Punjab Civil Services 2015 Biling Information Feed Prae Follow me on Unacademy unacademy.com/user yashi.gill01
plus Discount Code yashi.gill01 ETHICS, INTEGRITY & APTITUDIE Complete Course on Ethics, Integrity & Aptitude Lesson 27 Today, 6:00 PM Yasmin Gill OFF
Discount Code- 'yashi.gillo1 QUESTION OF THE DAY- Q-Over the last three years, India's bad loan policy has been m to rules. Comment oving from deal
DEALS TO RULES- IE Over the last three years, the new Insolvency and Bankruptcy Code (IBC) and RBI's Revised Framework for Resolution of Stressed Assets (RFRSA) have begun to show impressive results They have worked in recognition, deterrence (defaults are reducing), resolution (defaults are being cured) and speed (defaults are being cured faster) This is great news for financial inclusion of the small, honest and non-politically connected.
The "willful defaulter" tag is a distinction without a difference Banks face pain irrespective of whether a default is caused by Fraud, Competition, or Unsustainable Ambition Current court petitions by defaulting sugar, shipping and power companies against the IBC and RFRSA s dismissed because they want pre-IBC bank behaviour (discretionary bad loan recognition via restructuring or evergreening) that created our pre-IBC regime d be
China's share of bank lending to the private sector has shrunk, and total debt now exceeds 300 % of GDP (most loans went to construction because China produced three times as much cement between 2012 and 2016 as the US did in the entire 20th century) While China's treatment of defaulters is tempting they recently expanded restrictions on travel, buying homes, holding high-level jobs, kids school eligibility, etc for defaulters these practices are inconsistent with a democracy.
ISSUES esolutions Litigation has choked the pipeline with few Recovery rates are still lower than global averages 31 % of the ongoing insolvency cases have breached the 270-day deadline Recent SC judgement upholding the constitutional validity of the IBC, clarifying the relative position of secured and unsecured creditors, and holding the line on Section 29A (defaulter rebidding restrictions) means that the IBC is not a passing shower but climate change Consequently, action under Section 12A withdrawals is accelerating, a market for corporate control is emerging, and more equity is being raised
India's new policy-IBC plus RFRSA- ensures a time-bound exploration of all business, capital and ownership restructuring options before liquidation Direct impact of RFRSA lies in annualized reduction in bad loans RFRSA- Weekly reporting by banks on all accounts in default anytime during the week with exposure greater than Rs 50 million Requiring all lenders to initiate steps to cure a default Requiring an independent credit opinion for resolution plans Setting a 180-day implementation deadline for resolution plans in loans greater than Rs 2,000 crore
RFRSA represents the RBI's atonement for decades of irrational bad loan accounting norms Over the last three years, India's bad loan policy moving from deals to rules means the long arc of economic history is finally bending towards justice This remarkable reform will not only recover Rs 3 lakh crore plus for banks but has hugely positive consequences for India's productivity, wages and prosperity.