February 14, 2018

No More Lies: An Ultimatum for India's Banks

For the RBI, the banking regulator, the time to frown from the sidelines is over. U.S. 10-year yields are inching up toward the 3 percent danger zone. India's own 10-year government yields are about 7.5 percent -- a full point higher than in July. State-run Indian lenders, which dominate the banking system, are badly exposed to interest-rate risk because of their outsized government bond holdings. 

Hence the decisive step. Under the new RBI guidelines, delinquent loans above $300 million will have to be resolved with the borrower within 180 days. If there's no action, the debtor must be dragged to a bankruptcy tribunal within 15 days.

That's goodbye to things like Corporate Debt Restructuring (CDR), Strategic Debt Restructuring (SDR) and Scheme for Sustainable Structuring of Stressed Assets (S4A). These were all regulator-sanctioned plans that allowed taxpayer-funded banks to take haircuts without the fear that their CEOs could be hauled to jail on charges of collusion with debtors. Some of these measures were introduced by the previous RBI governor, Raghuram Rajan.

Read more at https://www.bloombergquint.com/opinion/2018/02/13/no-more-lies-an-ultimatum-for-india-s-banks

No comments:

Post a Comment