FM advises public sector banks to take tough stand against defaulting companies

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FM advises banks to take tough stand against defaulting co's
Finance Ministry has advised public sector banks to take a tough stand while sanctioning fresh loan to the corporate houses in case any of their special purpose vehicle (SPV) has defaulted, reported PTI.

The move, Finance Ministry is of the view, will help check rising bad loans which has touched a high of Rs 1.83 lakh crore at the end of June quarter. "If SPV set up by some promoting group turns out to be bad cases of wilful default then (public sector) financial institution and banks would do well to look out at entire group functioning, management style, and their exposure to the group," Financial Services Secretary Rajiv Takru told PTI.

"It would be quite inappropriate not to look at such serious event as part of deligence and monitoring where public investement and public money is involved," he said. Earlier, Finance Ministry had suggested that wherever possible, the banks can adopt a proactive approach for a change of management of the wilfully defaulting borrower unit as part of recovery of public money.

"People who fall into the category of wilful defaulters, I think better start getting used to the idea that you are likely to lose control and management of your company if you are going to manage it badly. "Banks must ask the company to change the management as the company is much more important than the fellow running it," he had said.

Dion Global Solutions Ltd.

Story first published: Thursday, November 14, 2013, 9:10 [IST]
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