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The clean-up begins: On RBI's move against 12 borrowers

But will the RBI’s move for insolvency proceedings against borrowers succeed?

Armed with the powers, a little over a month ago, to get lenders and defaulting borrowers to sit down and address the messy task of cleaning up toxic bad debts, the Reserve Bank of India (RBI) has decided to crack the whip. The central bank’s decision to act on the advice of its Internal Advisory Committee and direct lenders to initiate insolvency proceedings against 12 corporate borrowers — each owing in excess of ₹5,000 crore — has come not a day too soon. With gross non-performing assets (NPAs) at about ₹7 lakh crore, a regulatory intervention was imperative not only to safeguard the health of the banking system but also to ward off any wider impact on the economy. RBI Governor Urjit Patel underscored the importance of tackling the bad loans problem as recently as during the June 6-7 meeting of the Monetary Policy Committee when he said: “The quiescent investment cycle remains a key macroeconomic concern. It is, therefore, imperative to ensure resolution of stressed assets of banks and timely recapitalisation [of public sector lenders].” While the RBI has not divulged the names of the defaulting dozen, reports suggest they are largely made up of steelmakers and infrastructure companies. That steel companies were among the worst-hit in the wake of the global downturn in commodity prices and depressed demand in recent years is widely known; to that extent the sector’s presence in the list comes as no surprise.
The onus now shifts to the lender consortiums to expedite the insolvency process under the new Insolvency and Bankruptcy Code (IBC). The enabling architecture is now in place to speedily bring a defaulting borrower’s operations under the purview of an insolvency professional, once the National Company Law Tribunal has accepted the creditors’ application for initiating insolvency proceedings against the debtor. But the actual timeframe in which the resolution is going to occur remains to be seen, given that the IBC is still in its infancy. While the code has been drafted to bring under its ambit existing laws related to insolvency and bankruptcy, thereby curtailing the options available to a borrower who wishes to mount a legal challenge, the proof of the pudding as always will be in the eating. The fate of this long-overdue attempt at resolving the banking sector’s NPA crisis will ultimately be determined by how quickly the lender consortia are able to initiate the implementation of a resolution plan that retains the defaulting company as a going concern — there are, after all, thousands of direct and indirect jobs at stake here. Or, in the absence of approval for such a plan, start taking steps to liquidate assets. Source : THE HINDU


1) Whip (सचेतक) - Wh-ip
Meaning - a strip of leather or length of cord fastened to a handle, used for flogging or beating a person or for urging on an animal - Noun
beat (a person or animal) with a whip or similar instrument, especially as a punishment or to urge them on - Verb
Synonyms - flog, lash
Antonyms - discouragement
Example - A good speaker can whip the crowd into a fever of excitement.

2) Quiescent (मौन) - Qui-s-ant
Meaning - in a state or period of inactivity or dormancy - Adjective
Synonyms - inactive, inert
Antonyms - active
Example - Now that school has started back, my neighborhood is pretty quiescent during the day.

3) Divulged (उजागर) - Die-vul-g
Meaning - make known (private or sensitive information) - Verb
Synonyms - reveal, uncover
Antonyms - hide, keep
Example - Doctors must be careful to not divulge confidential information about their patients.

4) Onus (दायित्व) - On-us
Meaning - something that is one's duty or responsibility - Noun
Synonyms - brand, charge
Antonyms - benefit, blessing
Example - It is the onus of the applicant to completely fill out the application materials.

5) Expedite (शीघ्र) - Ex-pe-dite
Meaning - make (an action or process) happen sooner or be accomplished more quickly - Verb
Synonyms - accelerate, urge
Antonyms - delay, hinder
Example - If you would like to expedite the shipping of your order, please pay the express shipping fee.

6) Purview (परिधि) - Per-view
Meaning - the scope of the influence or concerns of something - Noun
Synonyms - acumen, apprehension
Antonyms - ignorance, misconception
Example - The general does not have purview over those who are not under his military command.

7) Infancy (प्रारंभिक अवस्था) - In-fan-see
Meaning - the early stage in the development or growth of something - Noun
Synonyms - beginning, roots
Antonyms - completion, finish
Example - The new company is still in its infancy.

8) Ambit (परिधि) - Um-bit
Meaning - the scope, extent, or bounds of something- Noun
Synonyms - boundary, extension
Example - Her case falls within the ambit of moral law.

9) Analogy (सादृश्य) - Ana-lo-jiMeaning - a comparison between one thing and another, typically for the purpose of explanation or clarification - Noun
Synonyms - comparison, correlation
Antonyms - difference, disagreement
Example (English) - PM Narendra Modi explained the importance of Yoga using an analogy of salt.
Example (Hindi) - प्रधान मंत्री नरेंद्र मोदी ने योग का महत्व नमक की समानता के प्रयोग से समझाया।

Now considering the article above as a Reading Comprehension question, try to answer the following -
  • What will you consider this as a clean up or growth?
  • Why did we have to pick this period of global market turmoil for banks to start cleaning up?
Given below are some words to check your vocabulary you can make sentences with those words in the comment section which will be reviewed by us.
  • Drafted
  • Resolution
  • Determined
  • Curtail
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