In August 2016, the chief executive officer (CEO) of a large bank celebrated the arrival of Insolvency and Bankruptcy Code (IBC), the new bankruptcy law of India. The jubilant boss of the bank, laden with a mound of bad assets, asked one of his colleagues how many days it would take to settle a bad loan under the new law. The banker’s response was 1,800 days,10 times the law actually stipulated! Needless to say that this cynicism was not appreciated.
A few months ago, the NBFCs (non-banking finance companies) were the flavour the season. Now the MSMEs (micro, small and medium enterprises) are. Both, for the wrong reasons.
The latest financial stability report of the Indian central bank, a biannual health check-up for the banking system, should be music to the ears of the CEOs of banks and the investors in bank stocks. The proverbial light at the end of the tunnel is, finally, in sight. The pile of bad assets, under which a few public sector banks (PSBs) have almost got buried, has started showing signs of erosion.