With a consortium of banks recently rejecting a Rs 4,000 crore offer made by industralist Vijay Mallya to settle dues of Rs 9,000 crore, industry body Assocham has asked the banks to be open to negotiations and cut their losses.
Coming out in support of Mr Mallya’s offer to repay the banks in staggered tranches, the industry body said the offer conveys his “intention to repay the loans” and asked the banks to ignore the “public discourse against the purported wilful defaulters,” and not be influenced by media reports.
“With so much shrill [sic] on the wilful defaulters, the banks and their principal shareholder, the Government of India, should take a dispassionate view of the case rather than being influenced by the media reports which at times get exaggerated in the ‘right-or-wrong’ debate,” said Assocham Secretary General D. S. Rawat, adding that the main concerns for the banks’ consortium should be recovery of assets which have become NPAs and all efforts must be made towards that end.
Mr. Mallya’s settlement offer has already been rejected by banks as they wanted something concrete on the table, even as the discredited businessman failed to appear before various investigative agencies like the Enforcement Directorate and the Serious Fraud Investigation Office (SIFO).
“Whether Mr Mallya has done something right or wrong should be left to the law enforcement agencies and the courts. The banks must evaluate with open mind what offer is on the table. Even if Rs 4,000 crore, as reported in the media, needs to be revised, the banks should be open to negotiations irrespective of the fact whether the borrower is sitting in Delhi or Dubai, Mumbai or London,” Mr. Rawat said.
Besides, with excessive focus on the “wilful defaulters,” the India Inc is being projected in a bad light in the eye of the general public, whereas the fact remains, they contribute a large part of the country’s Gross Domestic Product (GDP) and employment generation, Mr Rawat said.
In business cycles, “difficult times do come about. At times, the entrepreneurs face a crisis like situation despite best of efforts, said the Assocham statement, adding that in hindsight it does look as though the Indian industry, as was the case with the rest of the world, did over-step in expansions of capacities, stretching their balance sheets with high debts. But such an analysis is possible with the advantage of hindsight.
“Get your money back and cut your losses, if they occur,” said Rawat adding that the real test should be as per the definition of the RBI of a wilful defaulter. “The default to be categorised as wilful must be intentional, deliberate and calculated,” the chamber quoted the RBI Master Circular on the subject. “Once it is established that the borrower intends to repay, the default cannot be deliberate,” said Assocham.
Mr Rawat believes that in the present situation, the difficult times have to be faced by all the stakeholders- industry (borrowers) and the banks. “The choice has to be between keeping the units alive by taking some hair cuts or squeezing it to suffocation,” he said.
