Special-situation funds have $3-5 billion to buy bad loans and restructured assets from Indian banks, but often, they cannot do so due to legal wrangles, delays and problems in dealing with promoters, according to a survey by Alvarez & Marsal (A&M), which specialises in turnaround and interim management.
A&M estimates the Indian banking system is saddled with about Rs 6,30,000 crore of stressed assets - non-performing assets (NPAs) and restructured loans. Also, exits through the sale of distressed assets to asset reconstruction companies were underutilised, primarily due to the large gaps in the valuation expectations of buyers and sellers, the survey said. The guidelines on valuation of NPAs by banks had to be improved, the survey said, adding creditors found it difficult to enforce the securities Act due to legal loopholes and inordinate delays.
