Tag: IBC

IBC cases per RP may be capped, Code of ethics strengthened, BFSI News, ET BFSI

Banking & Finance

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The Indian Institute of Insolvency Professionals of ICAI (IIIPI) is working on a four-point plan for insolvency professionals.

The plan includes setting limits on the number of permissible assignments for each executive and their role in the prepack package for MSMEs.

The plan

IIPI has conducted study groups on four matters of contemporary topics on enhancing the role of small-sized IPs, response of insolvency regime to Covid, clarifying roles of IPs in respect of prepack framework for MSMEs, and creating code of ethics for our professional members.

The reports of these study groups are may take a month to complete.

The self-regulator and IBBI are aiming to strike a balance between resolution professionals coming from large institutions and standalone individual IPs, with the latter often finding themselves at a relative disadvantage in comparison with executives from top-draw consultancies.

IIIPI is also set to recommend urgent covid-response measures that IPs will likely follow in proposing any resolution plan. The quasi-judicial body is also defining a prudent role of IPs in the pre-packs.

IIIPI is drawing on best practices to craft a role for MSMEs, where promoters face default occasions due to macroeconomic environment or policy changes.

It has tapped legal expertise in the UK where prepack packages are a hit.

IIIPI is drawing a code of ethics by adding more clauses to the IBBI statute already available.

The recommendations would need to be approved by both the Insolvency and Bankruptcy Code of India (IBBI) and the government.

There are 3,500 insolvency professionals, three insolvency professional agencies, 80 insolvency professional entities, 4,000 registered valuers, 16 registered valuers’ organisations and one information utility.

IBC cases per RP may be capped, Code of ethics strengthened

IBC so far

Since the provisions of the Corporate Insolvency Resolution Process (CIRP) came into force on December 1, 2016, a total of 4,376 CIRPs have commenced till the end of March this year.

Out of the total, 2,653 have been closed, including 348 CIRPs that ended in approval of resolution plans. As many as 617 CIRPs were closed on appeal or review or settled, while 411 were withdrawn and 1,277 ended in orders for liquidation, as per IBBI’s latest quarterly newsletter.

Significant improvements in the score for resolving insolvency made doing business in India easier and the emergence of new markets for resolution plans, interim finance and liquidation assets are among others.

Apart from the few missing elements such as cross border and group insolvency to complement corporate insolvency, an institutional framework for grooming a cadre of valuers is sometime away.

As compared to the previous regime which took nearly five years for a conclusion, the process under the Code yielding a resolution plan takes on average 400 days. It, however, falls short of intended 180/270 days.



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Less than 4% of bankrupt realty firms see resolution at IBC, homebuyers hit hard, BFSI News, ET BFSI

Banking & Finance

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Five years after the Insolvency & Bankruptcy Code (IBC) was notified, only eight resolution plans have been approved although some 205 cases had been admitted until March 2021.

That translates into a success rate of under 4%, making it the worst-performing sector, barring computer and related activity.

The highest resolution is 10% for manufacturing where 178 of the 1784 admitted cases were resolved, followed by 7% for construction where 32 of 458 cases were resolved.

The hiccups

Unlike other sectors, there are more complexities in real estate. The rules keep evolving, which makes it difficult to comply with newer guidelines when a developer looks to take over a project.

For banks, the primary focus of the resolution exercise is to minimise the hit that they have to take on their loans and maximise the gains. In contrast, homebuyers want a more stable company to take over the company even if it means that lenders have to take a haircut.

A fall in real estate prices has complicated matters, making the project unviable for resolution applicants. In many cases, funds have been diverted and the debtor company doesn’t have sufficient money to construct the units. There are other complications when land is owned by more than one entity and needs to be combined, but in IBC there are no project or group insolvency provisions.

Less than 4% of bankrupt realty firms see resolution at IBC, homebuyers hit hard

Financial creditor status

The Supreme Court has upheld amendments to the Insolvency and Bankruptcy Code (IBC) that introduced a minimum threshold of 100 home buyers or 10% of the total allottees of a project, whichever was lower, for initiating the insolvency process against a defaulting developer. The homebuyers had not taken kindly to these amendments on the ground that in every other category even a single creditor could by itself move the insolvency court.

They had argued that this was discriminatory and placed homebuyers at a disadvantage as they would have to herd a minimum number before they could act against any errant builder. It was also time-consuming, they had claimed in court.

Before these amendments were made, even a single buyer with claims of at least ₹1 lakh could move the National Company Law Tribunal (NCLT) seeking insolvency proceedings against any builder. The amendments had been brought in after a top court ruling, which placed homebuyers on par with other financial creditors.

Some of the petitioners were money lenders, who had to also fulfil the same requirements to recover their monies lent to the builders for their real estate projects.

Defending the law, the government had said that it reduces multiplicity of cases in the NCLT and ensures quick disposal.



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Why FD investors get the short end of the stick under waterfall mechanism

Personal Finance

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Shivram, an FD investor in Dewan Housing Finance Limited (DHFL) talks to his chartered accountant cousin Janaki to understand the waterfall mechanism.

Shivram: Sorry to bore you with this when you’ve come for a fun visit Janu. I had DHFL fixed deposits when it went bust in 2019. I was happy to read somewhere that the Piramal group is going to take it over under IBC. I saw a resolution plan where FD holders will get back their money. But now I see the whole thing is going to drag on more, because creditors aren’t happy.

Janaki: Many of my clients hold not just FDs but also secured NCDs in DHFL.

Shivram: See, what irritates me is that these big lenders like banks and insurance companies are blocking FD holders from getting more money. They just voted out a proposal to give FD holders an additional ₹966 crore, over the ₹1241 crore proposed in the original plan. That would have meant my getting back over 40 per cent of the money, instead of 23 per cent. I’m already taking a 60 per cent ‘haircut’. Why can’t small investors get entire money back? Only big guys can afford costly haircuts!

Janaki: I see that you aren’t aware of the waterfall mechanism. When a company goes broke and has less assets than liabilities, this mechanism decides which lenders get priority over others.

Shivram: The only waterfall I know is in Kutralam! So Janu, tell me, why is this waterfall giving me a haircut?

Janaki: Haha, you see, haircuts and waterfalls come into play in the DHFL case because the Piramal group which is acquiring it is willing to pay only ₹37,250 crore for it. But DHFL has outstanding dues totalling to over ₹90,000 crore. So, lenders have to take haircuts.

Shivram: But how do they decide that pensioners like me take an 80 per cent haircut?

Janaki: That’s what the waterfall mechanism does. Imagine a mini-waterfall, not Kutralam, where the water pours down from a height and there are buckets placed below it at different levels. Water flows into the second bucket only when the first one overflows. The third bucket gets filled after the second. If there isn’t enough, the bottom buckets get only a trickle. Similarly, waterfall mechanism in debt resolution decides which creditors of a company are the top buckets when there isn’t enough money.

Shivram: Why does this waterfall mean FD holders get only 23 per cent of their money?

Janaki: Because FDs in a company/NBFC are unsecured borrowings. The IBC’s waterfall mechanism gives clear priority. With any money that comes in, the resolution costs are met first and any accumulated dues to workmen are paid off. Secured creditors get top priority. Salary dues to employees come after them and unsecured financial creditors like depositors only after that.

Shivram: You’re telling me people who invested in DHFL NCDs will not take haircuts?

Janaki: They too will but probably less than FD holders.

Shivram: So is nobody going to take a bigger haircut than me?

Janaki: Equity investors are, Shiv. They come last in the waterfall mechanism.

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Lenders say they will get 26% of their dues, BFSI News, ET BFSI

Banking & Finance

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The lenders to Siva Industries have told the National Company Law Tribunal that they will get 26% of their dues after taking into account third-party guarantors. Operational creditors will get part of their dues under the settlement plan, according to a report.

The deal has raised eyebrows as such offers by promoters were rejected in the past.

The NCLT, Chennai, has to explain the rationale behind the one-time settlement (OTS) offer made by Siva Industries under Section 12A of the Insolvency and Bankruptcy Code (IBC), 2016. The lenders have also been asked to give the timeline of cash flow to all the creditors.

Until the last payment is made to the lenders within the deadline of 180 days set in the OTS application, the liabilities of the company will not be extinguished, according to the report.

On the reason why they approved the 12A petition of promoters banks told the court that if a company is liquidated or in a resolution plan involving a third party, all operational creditors, including tax authorities, are wiped out

Also, the IDBI Bank‘s claim of Rs 644 crore will be paid while Blackstone-backed International ARC will get an additional amount of Rs 510 crore via land sale, according to the report.

The settlement

Lenders of Siva Industries and Holdings have approved a one-time settlement proposal from the promoter under which they will take a 93.% haircut and just Rs 5 crore upfront cash.

Of the company’s total dues of Rs 4,863 crore, the IDBI Bank-led lenders will get Rs 313 crore, excluding upfront payment, within 180 day of receiving NCLT nod.

They will recover Rs 318 crore, with Rs 5 crore as upfront cash, out of the company’s total dues of Rs 4,863 crore. This amounts to a haircut of 93.5 per cent.

The holding company owes financial and other creditors about Rs 5,000 crore. Tata Sons had filed a claim of Rs 863 crore against the Sivasankaran group company but that was rejected by the latter’s interim resolution professional.

The creditors received an offer from Mauritius-based Royal Partner for the company but that was rejected on the grounds that the investor had been unable to demonstrate its seriousness in completing the deal.

Unusual deal

Bankruptcy experts have termed the development unusual, citing the rejection of such offers by promoters in the past.

The acceptance of Sivasankaran’s offer differs from the usual pattern of rejection by creditors of such deals proposed by promoters seeking to withdraw their companies from bankruptcy proceedings.

Atul Punj of Punj Lloyd, Videocon’s Venugopal Dhoot, Sanjay Singal of Bhushan Power and Steel, and the Ruias of Essar Steel had all made offers to creditors to persuade them to drop bankruptcy proceedings. All were rejected.

In DHFL’s case, the promoter Kapil Wadhawan had offered to repay the debt in full, but the lenders ruled in favour of Piramal.

Experts say while banks may be getting the most out of such settlement in absence of any serious bid, but such a move weakens the IBC, especially Section 29A that bars promoters from bidding for their assets in a bankruptcy court. The Siva deal, if it goes through, could set a precedent of promoters striking settlement deals with banks when there are no bidders.



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Banks may recover more from Vijay Mallya assets than in most IBC resolutions, BFSI News, ET BFSI

Banking & Finance

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Banks are set to recover more from selling assets of fugitive Vijay Mallya than they are realising from most default cases under the Insolvency and Bankruptcy Code mechanism.

The IBC was notified in 2016 after Vijay Mallya’s defaults. A special court in Mumbai dealing with cases under the Prevention of Money Laundering Act (PMLA) has asked lifted the claim of the Enforcement Directorate on the Mallya’s assets it had seized, paving the way for banks to sell them to recover their dues.

The assets including several floors of the UB City commercial tower in Bengaluru’s central business district and shares in United Breweries and United Spirits that Mallya had controlled are estimated to be valued at Rs 5,646.54 crore. The banks reportedly have outstanding dues of Rs 11,000 crore. (Including the penalty and interest charges as the total amount due was Rs. 9000 crore in 2016)

“Lenders have security. Irrespective of what Vijay Mallya does, bankers have the security to recover their dues from his assets. And that security is very good and valuable. Recently, the PMLA court has approved the sale of his assets. In Mallya’s case, whatever is the narrative, whatever be his mistakes. I am sure the lender will recover better than many other stressed assets,” former SBI chairman Rajnsh Kumar told ETBFSI recently.

Mallya’s dues

The principal amount that Kingfisher had borrowed from the banks is Rs 5,400 crore. The largest lenders to the airline are State Bank of India with an exposure of Rs 1,400 crore, Punjab National Bank with Rs 7,00 crore and Bank of Baroda with Rs 500 crore. The loans are the principal amounts that banks lent to the airline without calculating the interest on it.

The court order

The PMLA court had noted that the assets it restored to banks were insufficient to fully recover their loss, which was estimated at Rs 6,203 crore.

Concluding that the restoration of properties to the banks was done in “good faith”, the court said: “…claimants are public sector banks and these banks are dealing with the public money. There cannot be any personal or private interest of said claimants to pursue such a claim against the present respondents and accused.”

The court noted that even Mallya himself had placed a proposal for repayment of the due amount. Had there really been no loss to the applicant banks, then, why was Mallya ready to repay the loss, it asked.

The court held that prima facie there was falsification of accounts of Kingfisher, which it said Mallya had full control of.

The airline did not have offshore operations, but its accounts allegedly indicate expenditure for fuel abroad, the court said. Also, despite it being virtually in default, the airline company during 2009-2011 transferred part of the loan amount to Force India Formula 1 racing team that Mallya had controlled, it said.

Comparison with other IBC cases

This week the NCLT passed an order giving Videocon Industries to Twin Star of Vedanta group. The resolution yielded less than 10% for lenders.

Bankers have lost over Rs 40,000 crore in the Videocon account, as Anil Agarwal’s Twin Star snapped the company for less than Rs 3,000 crore. This has been the story for most cases under IBC where barring the top nine accounts the average recoveries have been just 24%.



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Barring a few like Essar, banks have lost 80% dues in top NCLT resolutions, BFSI News, ET BFSI

Banking & Finance

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The resolution of Videocon Industries close to the liquidation value has put the spotlight on realisations through the Insolvency and Bankruptcy Code mechanism.

Bankers have lost over Rs 40,000 crore in the Videocon account, as Anil Agarwal’s Twin Star snapped the company for less than Rs 3,000 crore.

In over 363 major NCLT resolutions since 2017, banks have taken an average haircut of 80% over the past four years, the largest among them being Deccan Chronicle (95%), Lanco Infra (88%), Ushdev International (94%) and Zion Steel (99%).

While RBI has pointed to a recovery rate of 45% in IBC so far, barring the recovery rates in the top nine accounts, recoveries in other accounts average 24%. The top nine accounts were from the steel sector which led to good recoveries, while accounts in the power and infrastructure sectors struggle for buyers.

Lenders have been able eke out good recoveries in steel sector, with the highest being in the case of Essar Steel where lenders got 90% of their dues.

Fiscal 2021 drop

The realisation for financial creditors from IBC declined significantly in FY2021 with a total resolution amount of around Rs 26,000 crore, which is almost a quarter of the realisations in fiscal 2020.

The pandemic has increased operational challenges for the various parties involved in a CIRP, which resulted in limited cases yielding a resolution plan. The suspension of new proceedings under the IBC for the entire FY21 resulted in a sharp slowdown in the resolution process.

Out of the total 4,300 cases that have been admitted to bankruptcy courts since FY17, only 8% has been resolved and nearly 40% of the cases are still pending. About 30% of the cases have seen liquidation.

From its commencement in December 2016, 4,376 CIRPs have been admitted, of which 2,653 were closed till March 2021,

About 40% of the cases admitted by the NCLT were closed on appeal or settled or withdrawn under Section 12A which highlights that at least some promoters have been more willing to pay their dues to keep the IBC proceedings at bay. The extent of cases being referred to liquidation remains high at about 40% and only a quarter of such cases have seen the liquidation process come to a conclusion. The average realisation through liquidation has been a mere 3% of the claim amount.

Fiscal 2022 hopes

Although rating agency ICRA estimates that financial creditors could realise about Rs 55,000 crore to Rs 60,000 crore in FY2022 through successful resolution plans from the IBC. The higher realisation by the financial creditors would depend on the successful resolution of 8-9 big-ticket accounts, as more than 20% of ICRA’s estimated realisation for the year could be from these alone.



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With just 24% recovery rate, IBC lags other mechanisms, BFSI News, ET BFSI

Banking & Finance

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The Videocon resolution, which yielded less than 10% for lenders, has brought back recovery woes in the Insolvency and Bankruptcy Code mechanism in the spotlight.

Bankers have lost over Rs 40,000 crore in the Videocon account, as Anil Agarwal’s Twin Star snapped the company for less than Rs 3,000 crore.

While RBI has pointed to a recovery rate of 45% in IBC so far, barring the recovery rates in the top nine accounts, recoveries in other accounts average 24%. The top nine accounts were from the steel sector which led to good recoveries, while accounts in the power and infrastructure sectors struggle for buyers.

Recoveries from earlier resolution mechanisms resulted in a loss of nearly 70%.

Fiscal 2021 drop

The realisation for financial creditors from IBC declined significantly in FY2021 with a total resolution amount of around Rs 26,000 crore, almost a quarter of the realisations in fiscal 2020.

The pandemic has increased operational challenges for the various parties involved in a CIRP, which resulted in limited cases yielding a resolution plan. The suspension of new proceedings under the IBC for the entire FY21 resulted in a sharp slowdown in the resolution process.

Out of the total 4,300 cases that have been admitted to bankruptcy courts since FY17, only 8% has been resolved and nearly 40% of the cases are still pending. About 30% of the cases have seen liquidation.

From its commencement in December 2016, 4,376 CIRPs have been admitted, of which 2,653 were closed till March 2021,

About 40% of the cases admitted by the NCLT were closed on appeal or settled or withdrawn under Section 12A which highlights that at least some promoters have been more willing to pay their dues to keep the IBC proceedings at bay. The extent of cases being referred to liquidation remains high at about 40% and only a quarter of such cases have seen the liquidation process come to a conclusion. The average realisation through liquidation has been a mere 3% of the claim amount.

Fiscal 2022 hopes

Although rating agency ICRA estimates that financial creditors could realise about Rs 55,000 crore to Rs 60,000 crore in FY2022 through successful resolution plans from the IBC. The higher realisation by the financial creditors would depend on the successful resolution of 8-9 big-ticket accounts, as more than 20% of ICRA’s estimated realisation for the year could be from these alone.



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Bank of Baroda to sell 46 NPA accounts to recover Rs 597 cr, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: State-owned Bank of Baroda will conduct an e-auction of as many as 46 NPA accounts later this month to recover dues of Rs 597.41 crore.

The lender, in a notification, said it intends to sell these NPA accounts to asset reconstruction companies (ARCs) / banks / NBFCs or other financial institutions (FIs) on 100 per cent cash basis, for which the e-auction will take place on June 21, 2021.

The major NPA accounts put up for sale include Meena Jewels Export & Meena Jewellers Export (Rs 60.76 crore); Crystal Cable Industries (Rs 57.49 crore); J R Foods Ltd (Rs 41.60 crore); Shree Raghuvanshi Fibres (Rs 27.38 crore); Kaneri Agro Industries (Rs 24.69 crore); Man Tubinox (Rs 24.28 crore) and Aryans Educational and Charitable Trust (Rs 20.79 crore).

The last date for submission of expression of interest is June 19, the bank said, adding the completion of due diligence will take place on the same day.

“E-bidding timings will be from 11.30 AM to 12.30 PM with unlimited extension of 5 minutes in case the amount is increased by the bidders. The incremental amount shall be in multiple of Rs 10 lakh,” Bank of Baroda said.

With respect to Chennai-based Rahima Leather Exports against which there is an outstanding of Rs 9.13 crore, Bank of Baroda said it has received an ECGC claim of Rs 1.18 crore.

This account will be retained by the bank and not be passed on to ARC/NBFC/bank/FIs, it said.

Bidder will also have to give an affidavit that they are “in no way connected to or acting on behalf of or in concert or on behalf of any of the accounts or its promoters, including promoter’s family”, as per the provisions of Insolvency and Bankruptcy Code (IBC), 2016, it said.

The bank said any ECGC/CGTMSE claim received or to be received in any of the accounts under the sale will be retained by it and will not be passed on to ARCs/ banks/ NBFCs/ FIs.

The Export Credit Guarantee Corporation (ECGC) is a government owned body which provides export credit insurance support to Indian exporters.

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a government owned trust which offers credit guarantee to financial institutions which give loans to the MSME sector.



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Report, BFSI News, ET BFSI

Banking & Finance

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Financial creditors may realise Rs 55,000-60,000 crore in fiscal 2021-22 through successful resolution plans from the Insolvency and Bankruptcy Code (IBC), credit rating agency Icra has said.

The realisation for financial creditors from the resolution of Corporate Insolvency Resolution Process (CIRP) under the IBC declined significantly in FY2021 with a total resolution amount of around Rs 26,000 crore, almost a quarter of the realisations in FY2020, the agency said.

“As per our estimates, the financial creditors could realise about Rs 55,000-60,000 crore in FY2022 through successful resolution plans from the IBC,” the agency’s Vice President and Group Head – Structured Finance, Abhishek Dafria, said in a report.

The increase in the resolution amount in FY2022 would depend on the expected resolution of a large housing finance company which is awaiting the NCLT‘s approval but is also under litigation in the higher courts, he said.

In the current financial year, the realisation by the financial creditors would depend on the successful resolution of 8-9 big-ticket accounts, as more than 20 per cent of the agency’s estimated realisation for the year could be from these alone, he added.

Dafria, however, said if the second wave of the pandemic does not subside soon, it could have a bearing on the agency’s estimates as the difficult operating environment may result in a slowdown in the resolution process, especially for smaller-sized entities, and would also result in an increase in the haircuts for the lenders.

The agency said the pandemic has increased operational challenges for the various parties involved in a CIRP, which resulted in limited cases yielding a resolution plan. The suspension of new proceedings under the IBC for the entire FY21 resulted in a sharp slow-down in the resolution process.

From its commencement in December 2016, 4,376 CIRPs have been admitted, of which 2,653 were closed till March 2021, the report said.

The agency believes that there have been some positive outcomes from the presence of the IBC despite the delays that are becoming common.

“About 40 per cent of the cases admitted by the NCLT were closed on appeal/ review or settled or withdrawn under Section 12A which highlights that at least some promoters have been more willing to pay their dues to keep the IBC proceedings at bay,” it said.

For CIRPs that have yielded a successful resolution, the financial creditors have realised/are expected to realise an average 39 per cent of their claims while the realisation value, in comparison to their liquidation value, stands at 180 per cent, the report said.

“Nonetheless, the extent of cases being referred to liquidation remains high at about 40 per cent and only a quarter of such cases have seen the liquidation process come to a conclusion.

The average realisation through liquidation has been a mere around three per cent of the claim amount,” the agency’s Assistant Vice President and Sector Head, Sankha Subhra Banerjee, said.

Improving the turnaround time for successful resolution and finding enough interest in defaulting assets from external parties in the current environment will remain the key challenges for a while, he added.



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NCLT execution is frustrating; credit growth will remain a matter of concern, says Rajnish Kumar, BFSI News, ET BFSI

Banking & Finance

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Q. How are bankers mapping reality when everything is uncertain? How do you see credit growth this year?

Compared to the last year, the severity of lockdowns is not too much this year. If I look at the earnings of large corporations I can see that they are able to face the situation really well. Sectors like steel, cement and IT have shown some improvement. This year there is an impact on the rural economy, which was not there last year. Also, MSME is the most vulnerable and huge employment loss is a major concern. The key difference between 2020 and 2021 is that last year we had many measures from the government and RBI. My assessment is that the bank’s credit growth will remain a matter of concern this year too. Once vaccinations pick up and the third wave doesn’t strike, we can see a pick-up in the economy from the third quarter.

Q. Are the government and RBI initiatives generating the demand?

The government’s Emergency Credit Lending Guarantee Scheme (ECLGS) was very well received. RBI has kept the rates low and taken initiatives but the general belief is that monetary initiatives are not sufficient. We can’t do the heavy lifting which is required in the current situation. Right now the priority is to revive the demand and consumer confidence which can be done only by the government. Fiscal measures may be required. Given the constraints that the government has, the headroom is not unlimited. But this is an unusual situation and unusual steps are required.

Q. What should the government do to generate demand and consumption?

The government of Maharashtra reduced stamp duty from 6% to 2% and it generated a phenomenal business. This shows that such moves demonstrate the demand really well. It was an unprecedented move and it also improved the liquidity position of real estate developers. It is not necessary that only the central government should do all things; even state governments can take initiatives and offer incentives to encourage the demand.

Q. Has liquidation (at IBC) become a scam? Why are resolutions lesser than liquidations at IBC?

There are two things. First, generally for a better resolution what works is early detection. Here, many of the cases were really old and there was no chance of revival. Second, unfortunately, the weakest link in the whole IBC process is the execution. Many positions are lying vacant at NCLTs and many judges are going to retire soon. So how will the system work? We have thousands of cases. We are in a situation where the cases are piling up and resolution can’t happen. We have to make quick and immediate decisions. It’s a patient in the ICU and you can’t leave the patient unattended for months. There are cases where the resolution plan has been approved and voted on by the Committee of Creditors (COC) but there’s no decision from NCLT yet. It is a frustrating experience for the lenders. It is a frustrating experience for the resolution professionals. I don’t see any issue with the law, because a lot of amendments were carried out, but the execution is the weakest link. My view is if you can settle the cases without going to NCLT do that. You can think of a one-time settlement if you can. You may have a better recovery in certain cases there.

Q. Vijay Mallya is ready with the offer to settle the loans, are there legal challenges in accepting his offer?

There are no legal challenges, but till the time I was the chairman, there was no communication received from Vijay Mallya about any such offer. Also, lenders have security. Irrespective of what Vijay Mallya does, bankers have the security to recover their dues from his assets. And that security is very good and valuable. Recently the PMLA court has approved the sale of his assets. In Mallya’s case, whatever is the narrative, whatever be his mistakes, from lenders will recover better than many other stressed assets.

Q. With the emergence of digital and digital-only banks, where do you see SBI?

Today if technology is not the core of your business, then it will not survive. We were good at the back end. At SBI we have adopted digital heavily and the benefits are huge. Banking in 5-10 years will change beyond imagination. Large legacy banks also do not have a choice but to think like a tech company. Maybe it’s happening at different spaces at different banks, but SBI has its own advantage because of the customers and resources.

Q. What is the idea behind privatising two public sector banks?

The major issue is how long should the government capitalise the PSBs? And the government’s policy is also that they don’t want to have more than four entities in non-strategic sectors. There can be a question whether private banks perform better? But there is not an easy answer to this because there are failures in private banks as well. Also, the government wants to increase the governance of banks. So it’s a strategic decision. Because if the government wanted to only increase the governance they would have shifted the ownership of the PSBs to RBI, and the issue would have been resolved. RBI would have become the sole regulator and banks would have achieved similar results.



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