"The problem is once a loan gets into problems, the recovery process is much longer than earlier. It is not happening as fast as one would like it to. If one goes into the ditch, getting out of that ditch is much tougher than before," Kotak, vice-chairman and managing director of Kotak Mahindra Bank, told reporters on Wednesday.
Kotak said both Debt Recovery Tribunals and Debt Recovery Appellate Tribunals are "bottlenecks" that take time.
Elaborating on the reasons as to why it is taking it longer for recovery, bank's joint managing director Dipak Gupta said the legal process, along with the slowdown in growth and the global demand weakness is the root cause.
"The legal process is taking longer, the economy is not looking great. For some of these people (stressed assets), to rehabilitate and start working all over again, you need the general economy to be better. I don't think that is happening, that is taking time. The problem is much more global. It is taking time for recovery," he said.
"I think from where we had expected in the beginning, it is taking longer (for recovery)," Gupta said, adding it is not going to be an easy job for the lenders and they will have to work a lot harder.
The comments are interesting as they come days ahead of the second anniversary of the Modi government, that has been boasting of a 7.6 per cent GDP growth under a new calculation method of GVA (gross value addition) as most other parameters of growth like core sector growth, IPP numbers, exports have all be giving contrary signals about the health of the economy.
When asked about the asset quality review, Kotak was not so sanguine about its benefit, saying the outcome of the one-time exercise is only a subset of the stress.
"The AQR is a small subset for a much larger stress in the system. The actual pain depends on each bank, but AQR is not the end of it," he said.
It can be noted that lenders have had to recognise a lot of hidden stress on the books because of the exercise, leading to many of them showing historically high losses. RBI had reportedly asked banks to classify 150 accounts as bad over two quarters, which would result in provisions of over Rs 70,000 crore to be made.
Even though it had given time till March 2016 quarter for lenders to recognise the stress, the RBI is targeting to finish the balance sheet clean up process by March 2017.
Kotak welcomed the Bankruptcy Code which was passed by Parliament yesterday as a step in the right direction, saying it is important to let companies die if they are facing difficult problems.
If the code facilitates death of such companies, "it declogs a number of zombie companies. You cannot have zombie companies", he said.
When asked to comment on the two years of the Narendra Modi government, Kotak expressed hope that the "acche din" promised by the Prime Minister in his campaign are on the way.
"Lot of good things (have happened), and hopefully acchhe din are on the way," he said.
No comments:
Post a Comment