Deloitte analyses RBI's wilful defaulter norms amendments

Written By Unknown on Kamis, 11 September 2014 | 21.03

In an interview to CNBC-TV18's Ekta Batra, KV Karthik, Senior Director, Deloitte India gave his outlook on the RBI's tightening of wilful defaulter norms.

Below verbatim transcript of the interview

Q: One of the things that I wanted to bring up was that a lot of experts that have come on the channel have said that corporate governance will be one thing, which will possibly increase now going forward because of the tightening of the Reserve Bank of India (RBI) clauses on wilful defaulters. Is that your thinking as well?

A: Yes, that is true as well because if you look at the circular that has come in, the RBI has actually increased the scope of wilful defaulter list. So, you will have the group companies coming in, the individual guarantors coming in, that is, in case they have been providing guarantees to the promoter company. So, as such the ambit or the scope of wilful defaulter can increase.

However, there are two aspects to it. One is, the group companies who would be providing guarantees, say a parent company providing to its subsidiary, they will now have to evolve and they will have to start managing the operations of the group for which they have provided a guarantee because in case the group company starts defaulting then the banks have a recourse to coming after the guarantor and they will have to take care of that.

The second most important thing is the independent directors. As it is we know that there is a limitation on the pool of independent directors that are available in this country. So, the independent directors will also now have to be careful because at the end of the day if they are on the board of a wilful defaulter company, they will get tagged along and wherever they are representing this tag will follow them throughout whichever company they have been associated with.

One last aspect is it is not just this particular circular but if you combine it with the Companies Act which has been enacted last year, there will be more focus on a fraud risk management because the accountability of the board and the board of directors has increased. So, they will need to be very careful about the fraud risk management framework, the internal financial controls of the company so that they ensure that they do not end on the wilful defaulters list.

Also Read: Wilful default: RBI issues clarifications; widens ambit

Q: With regards to the recovery process, I wanted to understand because we had the State Bank of India ( SBI ) management tell us that now the process of recovery will possibly start sooner simply because they can start recovering the loan from the corporate guarantor along with the borrower at the same time which didn't exist earlier. The timeline has been expedited in terms of recovery from the corporate guarantor. In your sense do you think that recoveries will now become easier for banks or maybe they will increase for banks?

A: That is true to some extent but we also have to be cognizant of the fact that the circular recommends that this can be prospectively dated; it is not retrospective. So, what is the situation now is that for existing cases this will not help them expedite that case.

Going forward, definitely this should help because earlier what used to be the case was that whenever the banks had to invoke the guarantee of the guarantor, the guarantor used to come back and tell them that please exhaust your process with the primary borrower, sell off whatever assets that he has and then come back to me as a follow up in case you are not able to recover.

However, now with this circular they can invoke the guarantee simultaneously and go after the guarantor in case the primary borrower has refused to pay up for this defaults. So, prospectively this will help but retrospectively I have my doubts on that because this circular is supposed to be prospectively dated.

SBI stock price

On September 11, 2014, State Bank of India closed at Rs 2601.40, up Rs 48.40, or 1.90 percent. The 52-week high of the share was Rs 2833.85 and the 52-week low was Rs 1455.95.


The company's trailing 12-month (TTM) EPS was at Rs 147.33 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 17.66. The latest book value of the company is Rs 1584.34 per share. At current value, the price-to-book value of the company is 1.64.


Anda sedang membaca artikel tentang

Deloitte analyses RBI's wilful defaulter norms amendments

Dengan url

http://kebugaranhidup.blogspot.com/2014/09/deloitte-analyses-rbis-wilful-defaulter.html

Anda boleh menyebar luaskannya atau mengcopy paste-nya

Deloitte analyses RBI's wilful defaulter norms amendments

namun jangan lupa untuk meletakkan link

Deloitte analyses RBI's wilful defaulter norms amendments

sebagai sumbernya

0 komentar:

Posting Komentar

techieblogger.com Techie Blogger Techie Blogger