Letters: A prudent solution

With reference to the report, “Large wilful defaulters face criminal action” (March 18), at a time when various measures initiated by the government and the banking regulator have not yielded the expected results, the plan of one-time settlement and criminal action against wilful defaulters are proactive steps. These steps will succeed in speeding up the resolution of bad loans.

The recognition of defaulted loans in banks’ books and the plugging of legal loopholes to prevent delinquents from escaping criminal action are important to realise the securities charged to the banks.

The banking sector — especially, public sector banks — has had a bad experience realising their dues from wilful defaulters. Usually, the value of assets charged to the bank deteriorates and becomes worthless due to lengthy legal procedures. Realisation of dues from assets thus turns into a futile exercise.

Of course, a one-time settlement will cut into the profitability of banks, yet the move is justifiable because it will cleanse their stressed balance sheets. Banks need to be diligent and prudent to avoid further investigation. 

Setting up more oversight committees will minimise chances of corruption. However, the settlement process should not be delayed. Sectors hit by internal and external macroeconomic problems need to be given liberalised terms of settlement to speed up resolution without compromising on diligence.

While reworking the Joint Lenders’ Forum in order to avoid possible delays, the approval of three lenders with the highest exposure would pave the way for swift resolution of bad assets. However, it is also of paramount importance to ensure that the decision of those lenders in no way hampers the interest of other lenders.

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