As a part of the overall strategy to strengthen the recovery mechanism, finance ministry has asked state-run banks to tighten the noose on their defaulting corporate borrowers to monetize their non-core assets for repaying loans. The moves comes on the heels of the ministry earlier urging these banks to constitute board-level committees to monitor recovery and put in place guidelines for an early warning system as part of their non-performing assets (NPA) management.
According to the ministry, the lenders, if needed, should pressurize defaulting borrowers to exit out of such ventures. Testifying theses views, it added that banks are already putting pressure on the debt-laden Bhushan Steel to sell its non-core assets, while Neeraj Singal, the company's vice-chairman and MD, was arrested by the Central Bureau of Investigation in an alleged cash-for-loan scam, in which Syndicate Bank chairman SK Jain is one of the accused.
Around 35 banks, including the country's biggest State Bank of India, have an exposure of around Rs 40,000 crore to Bhushan Steel. In yet another case, state-run lenders are already battling in courts to declare the now beleaguered Kingfisher Airlines and its promoter Vijay Mallya as wilful defaulters.
Further, in a plan to reduce the pile up of bad loans at state-run banks, the government is also looking at speeding up the procedure to try loan default cases of over Rs 100 crore. Also, the ministry has constituted under VK Bhasin, former secretary in the law ministry's legal department, to suggest measures to deal with high-value wilful defaulters.
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