Monday, Apr 28, 2003
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By R. Gopalakrishnan
For instance, the Indian Bank, in its instructions to managers, has interpreted the words "minimum recoverable amount (MRA)" in the RBI guidelines as if the banks are free to recover higher amounts from borrowers, defeating the very objective of the scheme designed to be "non-discretionary, non-discriminatory". The Indian Bank has, in its in-house circular, said, "Since the outstanding balance/amount is mentioned (in the RBI guidelines) as the `minimum amount to be recovered', the branch/circle has the liberty to negotiate with the borrowers for higher amounts as this would help to improve the bottom line of the bank. It should be our endeavour to maximise the compromise amount taking into account the paying capacity of the borrower/guarantor and the realisability of the securities held, keeping the MRA worked out as per the guidelines as the minimum" Pointing to this glaring violation of the RBI scheme, the president of the Industrial and Financial Reconstruction Association for Small and Tiny Enterprises (IFRASTE), D.E. Ramakrishnan, asks how there could be an option for recovery of amounts as high as possible when the very objective of the RBI has been to enable bank managements to offer a settlement that would leave no room for discretion on their part or discrimination between borrowers. The RBI guidelines clearly spell out two different formulae for recovery of amounts in the case of NPAs classified as doubtful or loss as of March 31, 2000, and NPAs classified as sub-standard as of March 31, 2003 and which became doubtful or loss subsequently. "Obviously, the words `minimum recoverable amount' in the guidelines are intended that there could be no valid recovery under the scheme which could be less than the amount arrived at by applying the formulae. This does not mean that there was an option being given to extract higher recoveries", Mr. Ramakrishnan said. Talking to The Hindu, he pointed out that it was because of poor response to even the earlier non-discriminatory, non-discretionary one-time settlement (OTS) schemes that the RBI had issued the revised guidelines in late January this year. The banks took their own time in advertising the scheme, leaving little time for borrowers to know of it and exercise their option before April 30, 2003. Also, the advertisements themselves were often misleading about the scope of the scheme. Now, in implementing it, many banks were trying further to distort it, he said. Mr. Ramakrishnan also pointed out that the Indian Bank, as also some branches of the State Bank of India, had taken the liberty to include "legal charges incurred" and even "legal charges to be incurred" in the amount to be recovered as settlement, though the RBI guidelines did not provide for such options. A circular issued by the Indian Overseas Bank implied that accounts decreed in legal proceedings and those in which recovery certificates have been issued were not eligible for coverage under the RBI scheme. However, Mr. Ramakrishnan contended that the RBI guidelines did not prevent even decreed cases pending recovery from being covered by the scheme, provided the consent of the legal forum was obtained. He felt that these cases could be interpreted as being covered by the expression "pending before the courts/DRTs/BIFR" in the RBI guidelines.
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