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Arundhati Bhattacharya, chairperson of the State Bank of India, has a simple message for defaulters in a conversation with Shekhar Gupta on NDTV 24x7's Walk the Talk programme. Edited excerpts:
How bad is the bad debt problem?
When we started with this non-performing assets issue, the steel sector was not stressed. Now the steel sector is stressed because of dumping by China. Hopefully, over the next two quarters the pressure will ease. Then the upstream oil people are seeing stress because of the fall in oil prices.
Business risks will continue to occur no matter what we do, but those risks don't come in as a lot, like this time. Normally it happens slowly, in one sector and not in the other. In this case, it all came together. So we don't expect to come out 100 per cent clean, but clean to some extent.
Raghuram Rajan said first you accept the problem, and then you can deal with it...
There is no question of not accepting the problem. But you can't go to a war without weapons. Even though there is a debt recovery tribunal, it takes too long for resolution. The effort required is humongous.
And borrowers have access to enormous legal talent.
I do not discuss accounts, but because there is so much public attention, probably it is known we have been fighting (against Vijay Mallya) in the debt recovery tribunal from 2013. We have had 81 hearings there.
Various cases have been filed by him and we have filed counter-claims. There are 22 cases we are fighting here, and overall there have been 508 hearings. The number of adjournments is more than 180.
For one particular villa (Mallya's villa in Goa), which we were trying to get possession of, the high court passed an order saying it should be done in three months. The order was issued to the collector. The collector, in turn, held eight hearings and then went on leave.
This is the Goa government's collector?
Normally, collectors are supposed to take possession, not hold hearings. But this person held eight hearings.
We approached the attorney-general and said we need to really take up (Kingfisher Airline's loan default) in the highest court. We were told we had to go through debt recovery tribunal. The next day we moved the tribunal, which did not provide any relief. We went to the high court, which remitted it back to the tribunal, which did not give us the relief we are seeking. We need his assets under oath.
What are assets under oath?
What he owns. He should declare them under oath because he has given us a personal guarantee.
I often hear of the distinction between the limited liability of a corporate and personal liability...
Limited liability was created so that people could do big things. When you have an industry that needs hundreds and thousands of crores, you cannot give personal guarantees, it is a very big risk. And unless we create a risk-taking environment, there will be no business, no economy.
But when does one go after a person? It is only when a personal guarantee is given. And when do we ask for a personal guarantee? We normally ask for a personal guarantee if a business is in trouble and still the promoter wants us to advance money.
And which Mallya did...
Yes, there was trouble in the account, the account was already stressed. He wanted another opportunity to try and turn it around. We felt it was right for him to get that opportunity, but just as we risked money, we also asked that he put in a personal guarantee.
That's the reason why we have gone to him and not only after the assets of Kingfisher Airlines, because the guarantee was given by him, a guarantee was given by the holding company. We are going to go for recovery against all three.
Mallya packaged Kingfisher Airlines very well...
At one point all of us liked travelling by Kingfisher. It was an aspirational brand.
When you went to the AG, he said go to the debt recovery tribunal. Then?
We went to the tribunal but it did not give us any relief so next we went to the high court, which remitted it back to the tribunal. Then the tribunal issued its order which still didn't give us the relief we were seeking, which was his assets under oath. And then it went to the Supreme Court and is now posted for hearing.
Some coverage says banks were lax and so he got away...
I disagree with that. We tried our best to see the money is recovered quickly. Just as the government is looking at ease of doing business, it needs to look at ease of resolution. When something goes bad, resolution the world over happens in six-nine months' time. Here it goes on for years.