IBC changed India Inc’s view on default

IBC changed India Inc’s view on default

CEA Subramanian says firms now want to settle fearing loss of control over biz

IBC laws will prevail if banks refer case to insolvency
RBI to hold ‘structured meetings’ with bank auditors to deal with divergences
RBI wants NBFCs with assets over Rs 5,000 cr to appoint chief risk officers

“Before the Bankruptcy Code, lot of businesses were playing coin toss with the banks, and that imposed a a significant cost on the economy,” said Krishnamurthy Subramanian, Chief Economic Adviser (CEA), Government of India, here on Friday.

Speaking at the “Industry Future Forward” summit organised by the Confederation of Indian Industry-Southern Region (CII-SR), Subramanian said that such defaults have resulted in high cost of capital, because the banks’ credit spread are driven by “anticipated probability of default” and “loss given default”.

“Even if you have few bad fish in the pond, all the fish are thought to be bad,” Subramanian said, and added that banks have put the anticipated probability of default on those without a credit record, primarily the small and medium firms.

Noting that the attitude of the companies have changed after the Insolvency and Bankruptcy Code (IBC), Subramanian said borrowers are now coming forward to settle their dues, fearing loss of control over their business.

Highlighting the credit culture that prevailed in India for a long time, the Chief Economic Adviser cited the “doctrine of pious obligation” from the Hindu law, under which sons are held liable to discharge their father’s debts based on religious considerations.

Higher growth rates

On the state of Indian economy, Subramanian said that the average annual growth recorded in the last five years is higher than the growth rate recorded under any other government since liberalisation.

“We have recorded an average growth rate of 7.5 per cent despite slow credit growth and headwinds against globalisation which dampened our exports,” said Subramanian. Referring to the recent controversies over the GDP data, Subramanian said: “Given the number of touch points for policy in India, it is very hard to create a narrative that is far from the truth.”

He also lauded the Goods and Services Tax (GST) as a ‘path-breaking achievement’ of the government, adding that,“No path-breaking change achieves perfection immediately but let’s recognise the fact that it has changed India as one market and not 30-odd markets.”

Speaking at the event, CII President Rakesh Bharti Mittal said that the industry body has set ‘inclusiveness’ as this year’s agenda. He also highlighted the need to engage the youth through various employment opportunities by launching vocational training centres at the school-level. Mittal also suggested leasing out farm lands to the private sector for higher agricultural production.

Source- Business Line.

COMMENTS

WORDPRESS: 12
  • comment-avatar

    Thanks, it is quite informative

  • comment-avatar

    I enjoy the article

  • comment-avatar

    Some truly great content on this site, regards for contribution.

  • comment-avatar

    Some genuinely choice content on this internet site , saved to favorites .

  • comment-avatar

    You have mentioned very interesting details! ps nice website.

  • comment-avatar

    I have not checked in here for a while because I thought it was getting boring, but the last several posts are great quality so I guess I will add you back to my everyday bloglist. You deserve it my friend 🙂

  • comment-avatar

    I see something genuinely special in this internet site.

  • comment-avatar

    This is really interesting, You’re a very skilled blogger. I’ve joined your rss feed and look forward to seeking more of your magnificent post. Also, I have shared your website in my social networks!

  • comment-avatar

    I’m not sure where you are getting your info, but great topic. I needs to spend some time learning more or understanding more. Thanks for magnificent information I was looking for this info for my mission.

  • comment-avatar

    I like this site so much, saved to bookmarks. “American soldiers must be turned into lambs and eating them is tolerated.” by Muammar Qaddafi.

  • comment-avatar

    Some genuinely select blog posts on this site, saved to fav.

  • comment-avatar

    I like the helpful info you provide in your articles. I’ll bookmark your blog and check again here regularly. I am quite certain I’ll learn a lot of new stuff right here! Good luck for the next!

  • DISQUS: 0