Business owners tell SBI: ‘Please don’t send us to NCLT’

New Delhi: While there are about 1.8 trillion rupees in bad corporate debt to clean up, State Bank of India, the country's largest lender, is finding it simpler to recover loans as founders now want to avoid India's two-year-old bankruptcy law, says Anshula Kant, a managing director overseeing stressed assets at the lender. Policy makers have convinced business owners that they could lose their companies once the courts get involved.

"Want genuine founders to keep their companies"

While referring to the National Company Law Tribunal (NCLT), which oversees bankruptcy cases, Kant said: "The first thing they say when they come to us is 'Madam, please don't send us to NCLT'." If the founder is "genuine we don't want him to lose the company."

"the bankruptcy process is better suited for accounts where many lenders are involved, making it difficult to get everyone to agree to a restructuring"

Giving lenders only 180 days to recast loans once a payment is missed, the regulator has pressured lenders to take defaulters to court. The clean-up efforts have helped cut the bad-debt ratio at India's banks to 10.8 percent in September from 11.5 percent six months back. SBI bad-debt ratio stands at 9.95 percent, a one-year low.

One-time settlements the "preferred choice"

Kant, previously SBI's chief financial officer, said the lender is working with founders of various mid-sized companies to restructure loans and escape bankruptcy proceedings. If the founders have funding, one-time settlements are a "preferred choice", with the bank willing to take 40 percent, she said.

According to Kant, the bankruptcy process is better suited for accounts where many lenders are involved, making it difficult to get everyone to agree to a restructuring.