After taking years, bankruptcy will now take days to be resolved: Sanjeev Sanyal, Principal Economic Adviser

Talking to ET Now, Sanjeev Sanyal, Principal Economic Adviser, says process being initiated on 12 very large defaulters as accounting for 25% of the whole NPA problem now. The process normally takes something like 180 days. After that, it can be extended by 90 days.

Edited excerpts:


The move on NPA resolution is a welcome move. How much recovery are we looking at in the longer term? How will this process release begin?

This follows from the ordinance that came out a few weeks ago. This is the next step. We are not going to try and resolve the whole gamut of the problem but specifically look at the very largest cases, something like 40 to 50 of the largest cases. As a part of that, we have now identified 12 defaulters, they are very large defaulters as you yourself pointed out something like 25% of the whole NPA problem is accounted for by this lot.

Now the question here is what happens next? The process has now been started, the bankruptcy process does not mean that every last bit of this is going to be liquidated. That is not the case. This is a time-bound process and some of it may get resolved, some of it may get bought by ARCs but in the end, whatever is left over will be liquidated. There is now an inevitability to this machine now. It will resolve, if not liquidate.

Bankruptcy is usually a long-drawn process and the fact that we are looking at six to eight months, helps me understand that there will be enough takers in the market for a lot of these assets and when can we really start this money trickling in with respect to the banks?

It is a long-drawn process but at the end of the day, this process has been festering for years and now we are talking in days. The process normally takes something like 180 days. After that, it can be extended by 90 days. So, this process now begins to take form. Remember, some of this stuff is already in front of the NCLT so in a sense some of that time has already been used up so it is not like we are starting at point zero. Then these things will begin to fall in place if not as I said at the end of the process we liquidate.

No number on the recovery yet. Could you help us understand which are the sectors where we could see more action, which are the sectors which actually make a part of these 12 accounts?

I am not in a position to give the list. It is the Reserve Bank’s prerogative to announce them. But let me assure you that they are across several sectors and what we will recover we will find out. A whole point of going through this process is to find out in a transparent way, I do not want to guess what will happen the whole point of a market based solution is that the market takes a decision of how much these things are valued it is not for the government to announce that.

This is also going to be a very clinical process because a lot of these discretion has been removed. Do you believe this will significantly change the mindset of a lot of these promoters?

This is a transparent process and it is a time-bound and clean process. As far as the mindset is concerned. the message will go out that this is a environment where eternal ever greening of loans is no longer acceptable. But I do want to add a caveat here that we do not also want to create a mindset of taking a moralistic stand on genuine business failures. If you are going to move on to being a genuinely entrepreneurial economy where people take risks, then you will have failures as well. We need to remove the social stigma to occasional failure. The key here is that we should take it as a mature economy where there will be failures.