Insolvency and Bankruptcy Code: Reinventing the wheel?

Last resort shouldn't turn into first choice: The new Insolvency and Bankruptcy Code has serious drawbacks...
Reinventing the wheel?

This refers to Somasekhar Sundaresan’s article “Last resort shouldn’t turn into first choice” (Without Contempt, July 27). Closely following filing of a petition in the Gujarat High Court by Essar opposing insolvency proceedings initiated by banks, media and analysts became more liberal in expressing views that were not much supportive of the current efforts of GOI and RBI to use the new instrument of Insolvency and Bankruptcy Code to handle Banking System’s stressed assets. Let us not forget that NCLT was not conceived as a magic solution for NPAs, but was meant to strengthen the existing mechanisms to supervise and monitor banking business. All the existing arrangements including appraisal of prospective borrowers, online monitoring of projects financed and efforts for timely recovery will, hopefully, continue with more vigour and professionalism.
Let us remember that RBI is participating in the ‘Insolvency Resolution’ process, not by choice. Media converted Gujarat High Court’s observation that ‘those with professional degrees may not necessarily be competent to run companies’. That could have been skipped as an ‘innocent oversight’(to borrow a phrase from RBI deputy governor S S Mundra) in expressing their Lordship’s views, as, when you point an accusing finger to an unspecified target, all other fingers go in the opposite direction!
Indian financial sector is going through a transition and as the responsibility of other sectors for the chaotic situation gets identified and fixed, the health of Indian Economy will be restored and economic growth will not remain just a jugglery of numbers. If banking system has ‘stressed assets’ of a level higher than the tolerance limits, there are individuals and corporates who have gained in the bargain, who are making a last effort to get away by maligning the regulator and supervisor of banks. This time around, ‘WE THE PEOPLE’ are more vigilant and are watching the game closely.

M G Warrier

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