Source: The Hitavada      Date: 25 Nov 2017 10:46:54

THE presidential assent to the new bankruptcy code ordinance is a major step by the Government to combat the ugly culture of wilful and habitual defaulting in repayment of loans from the banks. This ordinance will certainly stall any such attempt in the future since the Government has proposed procedures to make it impossible for anybody to declare ‘distressed assets’ and avoid repayment of his financial liabilities and still make a fresh bid for money. With the non-performing assets (NPAs) mounting all the time and ill-intentioned people continuing to ask for more loans, it had become necessary for the Government to make arrangements to stall the tendency. There is every reason to hope that the new ordinance will send a tough message to the markets.

For the past few years, the borrowing community had been busy looting the money available through financial institutions, with almost no system to stall the uncouth tendency. The entire system had got corrupted to the core. The banks and other institutions, the people in financial ministries, the people in politics including ministers at various levels treated the national exchequer as something to be looted at will. Examples were available in huge numbers showing how political forces interfered in the borrowing process and breathed down the institutions’ necks to lend money to most undeserving of parties. In most such cases, the banks could muster no courage to reject the applications firmly, so much so that some people even suspected if the banks, too, were in collusion with the people wanting to defraud the national exchequer. There is every reason to believe now that all such ungainly activity would come to a standstill following the new ordinance.

Of course, the whole affair of giving loans or not giving loans to certain parties is quite tricky. Even as the Reserve Bank kept talking about the cumulative NPAs amounting to Rs. 114 lakh-crore, the then Governor Dr. Raghuram Rajan favoured a continued flow of credit to the deserving parties. The current Governor, Dr. Urjit Patel, who was Dr. Rajan’s Deputy at the RBI handling monetary policy issues, also felt that credit flow must continue even as the Government took steps to stall uncouth culture of looting nation’s money.

The new ordinance, that will become a law at an appropriate stage, is expected to introduce necessary corrections in the system and also put in place a firm checks-and-balances method that would not allow any wilful defaulter to make merry when Rome burns. In fact, such a step should have come decades ago when the nation’s financial planners realised for the first time that certain uncouth tendencies were out to loot the people’s money with no commitment whatsoever to repayment of loans. On a few occasions, such steps were suggested by some experts as well. Yet, for reasons that common people could not comprehend, the Government of the day did not pick up courage to cross the rubicon.

Now the Modi Government has taken that much-awaited step, which needs to be welcomed by all. For any Government to take such a step is not easy, of course, given the plebiscitary nature of political culture of our country. Yet, the Government has chosen to take the full risk and go the distance to the pole. This decisiveness proves the good intentions of the Government, no matter the after-effects in political terms. Because Parliament is not in session, the Government has taken the ordinance route. This approach is good in a way, for it avoids unnecessary stalling tactics by the Opposition, as the nation has seen on countless occasions in the past. Sooner or later, the ordinance will become law, thus giving further legitimacy to good intentions.