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FE best banks: ‘Don’t allow litigation to kill Insolvency and Bankruptcy Code’s spirit’

Winners of the FE Best Banks Awards with chief guest Narayanan Vaghul and The Express Group CMD Viveck Goenka. (Express photo: Nirmal Harindran)

The Insolvency and Bankruptcy Code (IBC) is a landmark law that has altered the way the bad loan menace and industrial sickness are tackled in the country and is way better than earlier mechanisms like BIFR where the recovery process was too tedious to yield anything worthwhile, former ICICI Bank Chairman Narayanan Vaghul said on Thursday.

However, too much of litigation is delaying the resolution process under the two-year-old IBC (which stipulates a time-bound resolution of stressed assets), "taking the spirit of the law away", he said at the FE Best Banks Awards here. Without dismissing the challenges to insolvency resolution process as teething troubles, efforts must be made to address them expeditiously, he added.

A recent central bank report had suggested that the recovery through the IBC was more than three times of that via other routes, including Board of Industrial and Financial Reconstruction (BIFR).

Vaghul highlighted the increasing tendency of bad loan-hit banks to turn risk-averse and improve exposure to the retail segment at the cost of the corporate sector. Given that the economy is showing signs of a recovery and companies need funds for investments, banks should not leave the corporate sector to fend for itself. A new precedent needs to be created for bank lending to the corporate sector, more so when development banking institutions have perished.

The Express Group Chairman and Managing Director Viveck Goenka said the IBC has forever changed "the balance of power between bankers and lenders". Banks have got back around Rs 2.5 lakh crore of overdue loans already and another Rs 50,000 crore-60,000 crore should get resolved in another few months, he added. Arundhati Bhattacharya, former Chairman of SBI who received life-time achievement award for her contribution to banking, said the Indian banking industry has the ability and resilience to get out of the current bad loan mess, or any other challenge that is thrown at it.

Earlier in a panel discussion on whether the digital will destroy traditional banking models, moderated by FE's Managing Editor Sunil Jain, participants said there is enough space to grow for both banks and fintech players and they complement each other, although there could be some tension at times. Outgoing Axis Bank Chief Executive Shikha Sharma stressed the indispensability of a partnership between banks and fintech companies and added that there should not be much of a worry as to who should control what.

SBI Managing Director PK Gupta said the country's largest bank is using its army of "data scientists" to march onward in digital banking system. BankBazaar founder Adhil Shetty highlighted the role fintech platforms are playing in catering for the people with limited income who are missing out of the opportunity to own credit cards. -FE