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Thursday, February 27, 2014

Unlike good old days the corporate borrowers today would find it difficult to dodge bad loans. For RBI now has raised the red flags. And gone stringent with respect to ensuring swift repayment of such loans! The governor has tightened the rules to fight against bad loans. The promoters of the company would now be made more accountable towards the debt. They would be asked to suffer the first loss instead of the banks that extended the loan. Moreover, the promoters would have to bring in more equity into the company in the event of restructuring of the asset. The lenders can also take action against the troubled companies producing clean balance sheets. Also decisions with respect to projects to be referred to the CDR (corporate debt restructuring) cell would be expedited faster. In cases of viable businesses, banks would take an extra mile in financing such entities but with prudence. For once even auditors who audit such bad loans will not be spared too. Such
provisions would apply for loans exceeding Rs 1 bn.

Well, this does not come as a surprise. That's because the stressed assets (non-performing plus restructured assets) number has surpassed 10% of total advances. Lurking bad assets has taken few banks down in the dumps. While corporates have partied hard, now it's time they bear the brunt too.

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