This system of wilful default is absolutely unjustifiable. It is totally against the principle of natural justice. It is the Banker who makes an allegation who is already biased before whom the Borrower has to put his representation, and it is the same Banker who takes the final decision. So how can we expect natural justice?
The RBI guidelines on wilful default declarations are also one-sided and lopsided. An entrepreneur or a businessman contributes 25% towards the project cost to be eligible for funding. But what about his ideas, sweat, into the business? If he withdraws money for his basic personal requirements for survival, how can you allege it as a diversion of funds?
His business acumen, ability to create a business, ability to create productive assets, ability to create a value addition? Does it hold any value?
Now there are various latest reforms. So if we consider the present reform like IBC, is it of any help to MSMEs?
IBC came into force with an objective to revive the business and maintain employment, but in reality IBC is a curse.
IBC is made applicable only to the corporates. MSME are either proprietary firms or partnership firms. How many MSME fall under the corporate segment? Means a selected few can opt IBC and the rest are deprived.
IBC gives maximum power to the lenders. Does lender have a business acumen? Are they competent to run the business?
Lender can provide capital to a business but not the skill and knowledge to run it. So, the focus should be revival of business, whether under IBC or under any other Acts, which can assure recovery.
The acts are formulated with an objective that banks should survive. There should not be any harm to the bank. If bankers continue killing the business to reduce NPAs, then whom they will lend? And if they cannot lend, how can they earn? It is high time that our law makers should understand that if business survives, banks will automatically sustain.
So, they should look at this aspect in a very different way. There has to be a serious paradigm shift in our thinking to reduce the Non Performing Assets in India.