As the National Company Law Tribunal (NCLT) labours to resolve the NPA cases that are queued up before it, the humongous losses, called haircut in the banking jargon are emerging on the horizon with certainty. In the first twelve cases referred to the NCLT for NPA resolution, the losses to the banks are to the tune of a shocking Rs.2.65 lac crores. And this is despite the best of efforts being put in by the NCLT to get the best offers for the companies lined up before it. It is worth noting that this list of the initial twelve, consists of companies, primarily in the steel and infrastructure sector, which are in flavour with the investors and hence had buyers. Yet the average recovery of loans by banks has been to the tune of 43% only, with 57% being written off by them.
Such losses of banks will be much more in the next list of companies that is waiting to be heard by the NCLT, not just because those sectors are not fancied by the investors at present, but also because their tangible asset base is comparatively very low. Many of these companies may simply not get any bidders and may be picked up by scrap dealers for a miniscule price.
While the haircuts/losses suffered by banks are in the news, what is not being spoken about is, that now that the size of the loss and the fraud inflicted on the banks is clear, what is being done to effect further recovery from those promoters, who have swindled banks and their companies, such that while they are still uber rich, their companies and even the lending banks have gone bankrupt. The judiciary needs to step up its efforts and resolve the following issues, in the interests of justice and to restore the faith of the common man, in the law of the land. These issues are:-
- How did such huge frauds/siphoning of funds by the promoters, occur in the very first place? They were clearly visible to the naked eye of a clean/conscientious man with common sense, then how were the bankers unable to spot them, with their years of experience, expertise and a trained eye. These are audacious banking frauds of a giant size, then why were the bankers blind to them and did nothing to stop them? This needs to be investigated and all those who are guilty must not just be punished severely, but recovery of loans/money lost must be made from the personal assets of all those who are found guilty.
- It is clear that these giant dud loans were given by the bankers, at the instructions of corrupt netas and babus. Unless these masterminds are not identified/punished and recovery of loans is made from them too personally, you can be sure that this saga will repeat itself in the years to come.
- It is clear that the bank loans were siphoned away. It is money that went out of the bank pockets into the pockets of fraudulent promoters. The money has not evaporated; it is just that it is now with those who plundered the system. This money must be traced and recovered and all those who abetted in its siphoning must not be spared.
The primary purpose of this post NCLT haircut exercise is to punish, recover and prevent a repeat of this national loot/plunder. Time is of essence here, because the more it is delayed the slimmer are the chances of recovery of this huge national wealth.