INSUBCONTINENT EXCLUSIVE:
SBI is also working to increase the amount of money it sets aside for soured corporate loans.Country's largest lender is finding fear can
be a potent weapon in recovering loans.With 1.8 lakh crore rupees ($25 billion) in bad corporate debt to clean up, State Bank of India is
having an easier time negotiating with founders keen to avoid the nation's two-year-old bankruptcy law, according to Anshula Kant, a
managing director overseeing stressed assets at the lender
That's because a crackdown by policy makers has convinced business owners that they risk losing their companies once the courts become
involved."The first thing they say when they come to us is 'Madam please don't send us to NCLT,'" she said, referring to the National
Company Law Tribunal, which oversees bankruptcy cases
If the founder is "genuine we don't want him to lose the company."Recent bankruptcy proceedings that wrested prominent companies from their
owners were a wake up call for country's business community, previously used to walking away from debts without major consequences
At the same time, the regulator has pressured banks to take defaulters to court, giving lenders just 180 days to recast loans once a payment
earlier, though it remains among the worst for a major economy
For SBI, it stands at a one-year low of 9.95 per cent.SBI is working with the founders of several mid-sized companies to restructure loans
and escape bankruptcy proceedings, said Mr Kant, who joined SBI in 1983 and was previously the lender's chief financial officer
One-time settlements are a "preferred choice" if founders have funding, with the bank willing to take a haircut of as much as 40 per cent,
she said.The bankruptcy process itself is better suited for accounts where several lenders are involved, making it hard to get everyone to
agree to a restructuring, according to Mr Kant.Consensus building isn't the only difficulty with the fledgling law
Legal challenges from founders, losing bidders and operational creditors have forced courts to extend the 270-day deadline for debt
resolution that was enshrined in the law.SBI recently sought bids for $2.2 billion of loans to Essar Steel India Ltd
after the company's founders challenged the mill's sale
Essar was among the first 12 companies forced before the nation's bankruptcy court by the regulator in 2017.Lost IncomeLenders lost out on
4,000 crore rupees in additional income due to delays in the resolution process beyond the time mandated by law, according to rating company
The number of cases of corporate debtors admitted before the courts that are yet to be resolved stood at 816 in September, it said.SBI is
also working to increase the amount of money it sets aside for soured corporate loans
The lender plans to raise its provisioning to about 70 per cent by March 2020 from about 57 per cent currently, Mr Kant said."We want a
cleaner balance sheet," she said
"It will be our endeavor that all corporate non-performing loans will be provided up to 70 percent by end of the next fiscal."
