Bring in new owners or managers for defaulting firms: Rajan

Bring in new owners or managers for defaulting firms: Rajan

MUMBAI: Outgoing Reserve Bank of India Governor Raghuram Rajan has asked banks to change business efforts are highlighted where existing promoters who are unable or unreliable. The governor has asked banks to attract new owners and new managers who can be both public sector undertakings or private sector actors.

Governor's statement comes at a time when bad loans of listed banks have jumped to Rs 5.8 million lakh March 2016 from Rs 3 lakh crore a year ago.

To encourage professionals in the treatment of these business managers stressed, the governor has suggested performance incentives such as stock options or bonuses for meeting cash flow or profit benchmarks. The RBI had in the past allowed banks to convert debt into equity under a strategic scheme of debt restructuring that gives banks the leverage to take care of any business in crisis. However, many companies are finding no takers stressed because they do not generate enough cash flow to service its debt. There have been reports that the government considering a proposal to ensure that public sector companies to bid for these projects.

Speaking at the Annual Conference FICCI-IBA Global Banking (FIBAC) Rajan said the review of asset quality initiated by him in early 2015-16 has resulted in the recognition of non-performing banks, take required measures. Now, with NPAs after being discovered, there was a need to improve the operational efficiency of business stressed he said.

"When necessary, new management teams projects have to be brought, sometimes as owners, and where this is not possible, because administrators. A creative search for new management teams, including the possible use of companies public sector or private sector actors, it is necessary, "Rajan said.

Speaking at addressing the current problem with lending stressed, the governor prepared the ground rules to ensure that problems do not recur in the future.