State-owned banks face dilemma amidst govt and RBI directives on wilful defaults
₹2 lakh crore reflecting also the aggressive efforts mounted by them in the recovery of loans. It is also true that the IBC has helped over time given the recognition by many borrowers of the weakening of their terms of negotiation compared to the past.
For the government, it would be better to expend more of its energies on bolstering the insolvency law to plug gaps to prevent possible gaming of its provisions by vested interests and to ensure greater autonomy for state-owned banks and their professionalization. There cannot be a more opportune time than now given the current healthy balance sheets of Indian banks.
Ideally, the RBI and government should work closely on this. For instance, the RBI’s circular had come out only as late as June this year and now the government, if the reports are correct, seeks to dilute the very objective of the RBI’s rules as stated in this circular.
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