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Non Performing Assets

                                Asset Reconstruction: A Tough Business

                                                                                                                                Anuj Chaudhary

Everybody sees Non Performing Assets as dead assets. But around 65% of NPAs are generating low revenue which is not an enough cash flow for these assets to repay their loans and debts. Thus, we should focus on these economically viable assets. They are not those NPAs which are either shut down or don’t have potential to generate sufficient amount of revenue. Some assets are financially broken down but they have potential if calculated money is invested in these firms then they will earn good profit to repay their debt. Hence, these firms need an additional funding.

Recovery time for these NPAs:
There is a long road to recover for these stressed assets. So, these firms take 5-8 years to recover from debt-burden performance. ‘Refinancing and Repayment’ under the supervision of lenders would be liable and credible. Are assets sale taking place too slow? Rs 2 lakh crore in bad loans sold over 4 years. Banks sold around 20%-25% of their NPAs. There is no Big Bang solution to get rid of NPAs in one go. The deterioration of Indian economy happened in 2011-12 due scams and bad planning which also created stress in the system. Lots of approval didn't come on time in 2012-13 i.e. environmental issues or mining permission.

Chief Executive Officer of Edelweiss Group, Rashesh Shah said, his firm finances or buys 30-35% of NPAs to reconstruct them. These firms are relivable when we can re-infuse some money for their restructuring. Low credit growth is a demand problem not a supply’s. There is excess capacity in the market for example power supply. Government should be pragmatic about it. But government should not intervene to resolve bad loans. Because bad bank won’t solve anything because pricing problem while selling any bad asset is creating deadlock for many NPAs.

Conclusion:
We need to solve case to case rather than government steps in hurry because all NPAs have their unique dilemma. Insolvency and Bankruptcy code one of the best things to happen as it works in many ways to resolve repayment conflicts because this law is well drafted. Now promoters scared of it because after this law it takes only 180 days to liquefy any such case. As far as Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is concerned, the Indian market is well secured and employees have the top spot in the preference list while banks come in the last. Hence, there is a need of more businesslike approach to bad loans/NPAs.






















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