A chance for Indian banks to move on
Aditya Berlia, an executive board member of the Apeejay Stya and Svran Group, a family-run industrial and investment house in New Delhi, talks about bad debt and distressed assets in India.
What’s the general scenario like when it comes to bad debt in India?
Non-performing loans have been a huge liability for the Indian economy, and something which the government has been trying to deal with for the last few years. Internationally, these are dealt with using bankruptcy proceedings, restructuring activities and asset sales.
How is this affecting your business?
Our group, being in a cash surplus situation, has been looking at purchasing several distressed assets in the last two years, but unfortunately, while the assets have been labelled as “distressed” by banks and even promoters, they had not discounted their value down to realistic levels. In many cases the book value of these assets has been greater than even the ideal market value – forget about the distressed value.
What are your thoughts on the RBI’s increased powers and efforts to manage the problem of bad debt in India?
The new move by the RBI is welcome as it may allow banks to try and sell these distressed assets at distressed prices. Earlier there was great opposition to this, as misbehaving promoters might have tried to buy these assets back at the lower price, which the banks were philosophically opposed to. It is heartening to see that there is a move towards a pragmatic approach, where concentration on getting maximum value and closing history takes precedence.
What is the outlook with regards to this situation?
Many of these assets have severely depreciated due to poor maintenance and encroachment while the banks and promoters figured out a process. It is time that banks are able to move on from the NPA crisis, and close their old losses so they can concentrate on fresh, proper lending to propel the economy forward.
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