‘Defaulting promoters must be barred from bidding’

‘Defaulting promoters must be barred from bidding’

Context:

• Axis Bank Chief has called for creating a better credit culture for long-term benefits.

How to achieve better credit culture?

• One way to achieve it is to exclude the defaulting promoters from bidding for their assets during insolvency proceedings.
• With the Reserve Bank of India (RBI) doing away with all the past dispensations to resolve the bad loan problem, and voting for initiation of insolvency proceedings against erring borrowers, there is a need to strengthen the National Company Law Tribunals (NCLTs).
• It is important that the capacities of NCLTs are expanded so that they can deal with all cases.
• The promoters of companies against whom banks had initiated insolvency proceedings should be kept out of the bidding process for the same assets for the long-term benefit of improving credit culture.
• A short-term goal for banks would be to look at maximising the value from the assets which are being put up for bidding and that can happen by allowing the promoters to bid for the assets.
• From a longer-term perspective getting the right credit culture where every borrower repays is more important.