The root cause of NPA is the delayed cash flow.It is a fundamental flaw.
Cash flow is delayed from Indian Government agencies most of the time
Take the example of IT companies, which complain of delayed payment from Govt. agencies.Due to dwindling Export business , they are looking for Govt. Contracts.Also Govt. deals are very rigid and does not accommodate changes.
Also in construction companies, payment delays do occur around 3 trillion dollars.
Govt. website shows that around rs 28,000 crore money has not been paid to power companies. And to make things worse 34 companies having a NPA of rs 1.4 trillion were asked to sell their entire investment of rs 3 trillion as per 180 days mandated by RBI.
The biggest problem is RBI is applying bankruptcy as time bound case instead of looking at the root cause.
There are situations when the time bound scenario does not work and it is in the hands of the owners.For example-: payment delays by state distributors, problems in the supply of coal.
The supreme court quashed the RBI circular of feb, 2018 in April 2,2019.This will likely pave the way.
The solution is not to sell the assets. Even if the asset are sold, if the fundamental flaws of delayed payment exists nothing will come out of that.
What is required is penalty for not adhering to timely payments.Double that of the SBI rate.Central Govt and state Government should be taking a lead on this.
regulatory oversight will be needed to real time monitor ,prompt actions this will prevent ever greening of loans from the inception.
The biggest problem is RBI is applying bankruptcy as time bound case instead of looking at the root cause.
There are situations when the time bound scenario does not work and it is in the hands of the owners.For example-: payment delays by state distributors, problems in the supply of coal.
The supreme court quashed the RBI circular of feb, 2018 in April 2,2019.This will likely pave the way.
The solution is not to sell the assets. Even if the asset are sold, if the fundamental flaws of delayed payment exists nothing will come out of that.
What is required is penalty for not adhering to timely payments.Double that of the SBI rate.Central Govt and state Government should be taking a lead on this.
What is required is penalty for not adhering to timely payments.Double that of the SBI rate.Central Govt and state Government should be taking a lead on this.
regulatory oversight will be needed to real time monitor ,prompt actions this will prevent ever greening of loans from the inception.
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