Tag: nclt

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About 40% of the cases admitted by the NCLT were closed on appeal or settled or withdrawn under Section 12A which highlights that at least some promoters have been more willing to pay their dues to keep the IBC proceedings at bay.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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Does Siva settlement signal banks’ disillusionment with IBC?, BFSI News, ET BFSI

Banking & Finance

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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, 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 settlement

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.

Other controversies

Sivasankaran, who was the founder of Aircel before he sold it to Malaysia’s Maxis Communications, is no stranger to controversy.

The South India-based businessman has been at the centre of a probe by the Central Bureau of Investigation (CBI) over alleged irregularities in loans obtained from IDBI Bank. Sivasankaran was accused of obtaining loans from IDBI Bank’s overseas branches and using the proceeds to repay loans obtained from the bank in India which had turned non-performing.

He was also accused by Cyrus Mistry of receiving favours from Ratan Tata such as the grant of a loan to buy a stake in Tata Teleservices. But these allegations were rejected by the Supreme Court in its verdict on the Tata-Mistry dispute delivered on March 26.

Siva Industries was admitted for bankruptcy proceedings on July 4, 2019, as per a public announcement uploaded on the website of the IBBI.



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Wadhawan, Dhoot may lose assets as banks move to invoke personal guarantees, BFSI News, ET BFSI

Banking & Finance

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The business tycoons whose bankrupt companies have been sold for a small fraction of the loans they owed may not be let off easily.

Lenders are in the process of appointing advisors to arrive at a fair value of their assets following the Supreme Court’s order on invoking personal guarantees of defaulting promoters.

Banks are assessing the value of assets held by promoters of at least 40 companies that are under the insolvency process, according to a report.

The promoters whose value of assets is being determined include Kapil and Dheeraj Wadhwan of DHFL; Videocon promoters Venugopal and Rajkumar Dhoot; Lanco Infratech’s Madhusudhan Rao and family, IVRCL’s Sudhir Reddy and Jatin Mehta of Winsome Diamonds.

Armed with the Supreme Court go-ahead to seize assets of personal guarantors, banks are looking to recover money parked in family trusts.

Many of the family trusts created by businesspeople are meant primarily to protect their assets from potential claims related to their companies, such as in bankruptcies. Neither lenders nor agencies such as the Enforcement Directorate or income tax department have been able to penetrate these asset protection trusts.

The SC verdict

The Supreme Court had upheld the validity of the Centre’s notification allowing banks to proceed against personal guarantors for recovery of loans given to a company under the Insolvency and Bankruptcy Code (IBC).

A bench comprising justices L Nageswara Rao and S Ravindra Bhat held that approval of resolution plan under the IBC does not discharge personal guarantors of their liability towards the banks.

“In the judgment, we have upheld the notification,” Justice Bhat said while reading out the conclusion of the judgement which decided as many as 75 petitions pertaining to the validity of the notification.

Petitioners had challenged the November 15, 2019 notification issued under the IBC and other provisions in as far as they relate to personal guarantors to corporate debtors.

Upholding the validity of the notification, the top court ruled that initiation of an insolvency resolution plan for a company does not absolve corporate guarantees given by individuals from paying up the dues to financial institutions.

The IBC law

Under the IBC law, banks can go after the family trusts formed by promoters or those who have given personal guarantees, provided there is a fraud or siphoning of money involved as per provisions of the IBC.

Promoters of several Indian companies had earlier accused their professional managers of fraud and diverting company funds. But they would not get any respite from the IBC as lenders will now invoke their personal guarantees.

SBI action

SBI was one of the respondents to the 74 petitions and challenges by promoters on invocation of personal guarantees. It has been in the forefront of invoking guarantees of promoters of defaulting companies. It had invoked Rs 1200 crore of guarantees given by Ambani for defaulting companies Reliance Communications and Reliance Infratel.

In January SBI had also approached the Mumbai bench of the NCLT to initiate invoking guarantees by the Videocon Industries Dhoot brothers totalling Rs 11,500 crore.

It had also taken Bhushan Power & Steel promoter Sanjay Singal to court to recover Rs 12,276 crore dues to the bank for which he was a guarantor. All these promoters had challenged these actions in court.



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

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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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Banks stare at over Rs 40,000 crore haircut in Videocon resolution, BFSI News, ET BFSI

Banking & Finance

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Lenders to Videocon Industries face over Rs 40,000 haircut after the National Company Law Tribunal allowed billionaire Anil Agarwal’s Twin Star Technologies to take over Videocon Industries Ltd for about Rs 3,000 crore.

Twin Star, a part of Vedanta Group, will pay around Rs 500 crore within 90 days as upfront payment and the rest as non-convertible debentures over a period of time.

The offer by the Dhoot family entailed repayments until 2035, which was not acceptable to many banks on Videocon’s Committee of Creditors (CoC), according to reports. Dhoot’s settlement offer was made for 13 out of the 15 Videocon group companies, which are jointly going through the Corporate Insolvency Resolution Process (CIRP). Two group companies — KAIL and TREND — were not covered under the offer. Though the bid is less, the Twin Star offer of Rs 3,000 crore is slightly higher than the liquidation amount of Rs 2,600 crore.

Videocon Industries and its 13 group entities owe Rs 61,770 crore to financial creditors. The State Bank of India claim is Rs 11,152 crore while IDBI Bank owes Rs 9,922 crore.

The Committee of the Creditors of Videocon Industries had voted in favour of the resolution plan of Twin Star Technologies Ltd, for 13 group companies with 95 per cent votes on December 11, 2020.

The NCLT order

A two-member Mumbai bench of the NCLT comprising members – H P Chaturvedi and Ravikumar Duraisamy – approved the resolution plan by Twin-Star Technologies.

Videocon Industries also confirmed the development through a regulatory filing. NCLT has pronounced the order on June 8, 2021 (Tuesday) approving the Resolution Plan for the Consolidated Corporate Debtors including the Company, under Section 31 of the Code, it said.

“The Approval Order has not yet been published and is currently awaited. Videocon Industries further informed, “in terms of the Resolution Plan, the equity shares of the Company are proposed to be delisted”.

Accordingly, an appropriate disclosure would be made upon receipt of the copy of the order by the NCLT approving the Resolution Plan, it added. This approval will also now consolidate Vedanta’s hold in Ravva oil field. Vedanta’s interest in Videocon is principally driven by the latter’s 25 per cent stake in the Ravva oil field in the KG Basin.

Following that the resolution plan was moved by the resolution professional before NCLT.

Later, the resolution Plan, as approved by the CoC, was filed with the NCLT for its approval on December 15, 2020. NCLT has conducted a consolidated corporate insolvency resolution process by combining Videocon Industries and other 12 Videocon group companies.



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Banks stare at over Rs 40,000 crore haircut in Videocon resolution, BFSI News, ET BFSI

Banking & Finance

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Lenders to Videocon Industries face over Rs 40,000 haircut after the National Company Law Tribunal allowed billionaire Anil Agarwal‘s Twin Star Technologies to take over Videocon Industries Ltd for about Rs 3,000 crore.

Twin Star, a part of Vedanta Group, will pay around Rs 500 crore within 90 days as upfront payment and the rest as non-convertible debentures over a period of time.

The offer by the Dhoot family entailed repayments until 2035, which was not acceptable to many banks on Videocon’s Committee of Creditors (CoC), according to reports. Dhoot’s settlement offer was made for 13 out of the 15 Videocon group companies, which are jointly going through the Corporate Insolvency Resolution Process (CIRP). Two group companies — KAIL and TREND — were not covered under the offer. Though the bid is less, the Twin Star offer of Rs 3,000 crore is slightly higher than the liquidation amount of Rs 2,600 crore.

Videocon Industries and its 13 group entities owe Rs 61,770 crore to financial creditors. The State Bank of India claim is Rs 11,152 crore while IDBI Bank owes Rs 9,922 crore.

The Committee of the Creditors of Videocon Industries had voted in favour of the resolution plan of Twin Star Technologies Ltd, for 13 group companies with 95 per cent votes on December 11, 2020.

The NCLT order

A two-member Mumbai bench of the NCLT comprising members – H P Chaturvedi and Ravikumar Duraisamy – approved the resolution plan by Twin-Star Technologies.

Videocon Industries also confirmed the development through a regulatory filing. NCLT has pronounced the order on June 8, 2021 (Tuesday) approving the Resolution Plan for the Consolidated Corporate Debtors including the Company, under Section 31 of the Code, it said.

“The Approval Order has not yet been published and is currently awaited. Videocon Industries further informed, “in terms of the Resolution Plan, the equity shares of the Company are proposed to be delisted”.

Accordingly, an appropriate disclosure would be made upon receipt of the copy of the order by the NCLT approving the Resolution Plan, it added. This approval will also now consolidate Vedanta’s hold in Ravva oil field. Vedanta’s interest in Videocon is principally driven by the latter’s 25 per cent stake in the Ravva oil field in the KG Basin.

Following that the resolution plan was moved by the resolution professional before NCLT.

Later, the resolution Plan, as approved by the CoC, was filed with the NCLT for its approval on December 15, 2020. NCLT has conducted a consolidated corporate insolvency resolution process by combining Videocon Industries and other 12 Videocon group companies.



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63 Moons to challenge NCLT nod to Piramal’s DHFL buy

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63 Moons Technologies on Tuesday said it plans to challenge the order of the National Company Law Tribunal (NCLT) approving Piramal Group’s resolution plan for Dewan Housing Finance Corporation.

“63 Moons believes that the current resolution plan is contrary to law and against the interest of all DHFL’s creditors, including non-convertible debenture holders,” it said in a statement.

The move comes a day after the Mumbai Bench of the NCLT approved the Piramal Group’s ₹37,250 crore resolution plan for DHFL, subject to certain conditions.

NCD holders disappointed

63 Moons holds over ₹200 crore of NCDs of DHFL. It had earlier filed an application in theNCLT, Mumbai seeking that the fraudulent transaction recovery benefit of about ₹45,000 crore filed by the DHFL administrator should come to creditors, including NCD holders and not to the buyer of the company.

“The current resolution plan is disappointing for NCD holders in as much as they stand to bear the greatest loss as opposed to any other party involved. Other members of the Committee of Creditors, which comprise mainly banks, have recourse to personal guarantees of promoters whereas NCD holders do not have any such contractual recourse,” it added. The statement added that NCD holders will be left high and dry with haircut of 65-75 per cent if, in future, such recoveries from fraudulent transactions are allowed to pass through to the resolution applicants, instead of the creditors.

“63 Moons is awaiting for the copy of the order and will be reviewing its options on the basis of advice from its legal advisors,” it said.

Another challenge

Fixed-deposit holders of DHFL are also planning to challenge the NCLT order in NCLAT as they want 100 per cent re-payment.

63 Moons said the Resolution Plan is drafted in such a way that it favours the resolution applicant or Piramal Group.

“Ascribing a value of ₹1 to the recoveries of fraud where claims are in excess of ₹45,000 crore creates unjust enrichment of the buyer (Piramal) at the cost of creditors,” it said, adding that Piramal has bid only for the current value of DHFL, which does not include these amounts that were taken away fraudulently.

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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 clears Piramal’s resolution plan for DHFL

Banking & Finance

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After many a twist and turn, the debt resolution plan submitted by Piramal Group for Dewan Housing Finance Corporation Ltd (DHFL) has been finally approved by the National Company Law Tribunal.

DHFL is the first financial services company to get the NCLT nod under the insolvency process. The Committee of Creditors of DHFL had in January voted in favour of the resolution plan of Piramal Capital and Housing Finance Limited (PCHFL), a wholly-owned subsidiary of Piramal Enterprises Ltd.

According to the resolution plan, the total consideration for DHFL will be ₹37,250 crore, including an upfront cash payment of ₹12,500 crore and a deferred component of ₹19,550 crore.

“This is one of India’s largest IBC proceedings, and the very first in the financial sector. In that regard, it is an important and positive trendsetter. The approval from NCLT is a significant milestone in DHFL’s resolution and an affirmation of the sanctity of the IBC process,” a Piramal Group statement said.

Challenges ahead

According to sources, the Piramal Group is looking to complete the resolution process by August. However, it is likely to be delayed with many parties contemplating  approaching higher courts. DHFL’s erstwhile promoter, Kapil Wadhawan, has made an offer to take back control of the company and wants the top court to pass an order asking the CoC to vote on his proposal.

The NCLT’s Mumbai Bench, comprising HP Chaturvedi and Ravikumar Duraisamy, on Monday said the approval is subject to the Supreme Court decision on the petition filed by Wadhawan. The NCLT, however, dismissed a plea by Wadhawan, who had sought a copy of the successful resolution plan.

FD holders to move NCLAT

The other challenge could be from fixed deposit holders, who are demanding full payment under the debt resolution process. Vinay Kumar Mittal, a lead petitioner in the court on behalf of FD holders of DHFL, said they would be filing an appeal in the NCLAT. “We want 100 per cent payment. The moment the NCLT order is uploaded, we will be moving the NCLAT,” he told BusinessLine.

It is to be seen if other parties such as Wadhawan or 63 Moons Technologies take up a similar line of action.

Piramal Enterprises shares closed 1.87 per cent higher on the BSE at ₹1,960.75 a piece, while the DHFL scrip also rose  9.76 per cent to ₹20.8.

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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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