This refers to the editorial "Banking on thin ice" (June 24). Only a dozen entrepreneurs, who are experts in the game of permutation and combination to form new companies, have been occupying the lion's share of bank loan funds. Quite a few of these companies have been successfully dodging repayment of loans, and have also been getting them restructured.
There are certain things that need to be done urgently. First, as assured repeatedly by Prime Minister Narendra Modi, political or bureaucratic interference in the decision-making process in banks should be outlawed completely. Second, while banks hereafter will be at liberty to acquire the promoters' equity pledged with the banks, the scope of doing this should be widened to ensure that no bank would do so by offering any price higher than what is ruling in the market. The sordid story of Kingfisher Airlines of how the State Bank of India and other lenders paid substantially higher prices when they acquired shares of this "dead as a dodo" company, tells its own tale. Third, the aberration of a borrowing company's market cap being substantially less than its loans from banks, should stop. There should also be an obligation that would make the role of independent directors more important.
N Narasimhan Bengaluru
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