Banks and financial institutions (FIs) are bickering on the sharing of amounts recovered as a result of the new securitisation law.
Some bankers feel that the cream of the spoils is going to the FIs and not to the banks because the FIs have the first charge on fixed assets like plant and machinery.
Institutional sources counter this by saying that FIs have taken a bigger business risk by taking a long-term exposure and it is only natural that banks will get their share after the dues of the institutions are settled, because banks have the second or third charge on the fixed assets.
Banks are, however, bargaining hard. They are trying to extract a commitment from the FIs on their share of the recovered money before agreeing to issue an ultimatum to defaulting corporates. According to the Act, 75 per cent of the secured creditors need to agree to move against any defaulter. If the banks do not agree to the move, the FIs alone cannot go ahead and sell the defaulting units to recover their money.
Parliament has passed the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Bill, 2002.
