Commenting on the Insolvency and Bankruptcy Code and the Reserve Bank of India’s February 12 circular on speedier recovery of bad loans, Kumar said these two rules were game-changers.
“These laws will bring discipline in credit markets which was lacking prior,” he said, adding every capitalist economy needed an insolvency court.
He said the relationship between bankers and the industry was built on trust. “In several cases there has been a serious breach of that trust, maybe the verification process was missing.”
Delayed response by bankers was also a factor in aggravated NPAs, he said.
“Consortium banking increases risk, due to delayed decision. One way is to limit size of consortium and not have too many banks. Second, the consortium should be comprised of like-minded banks with the same risk appetite,” Kumar said.
He said NPAs reached their peak in March 2018 and were seeing a decline. “Most sectors are seeing a turnaround with government’s effort. One sector which is still under stress and hope is less is power. There is a need to fix power sector.”