Key pointers from ASSOCHAM | ASSOCHAM in a meeting with Hon’ble Finance Minister vis-à-vis pre-budget consultations with stakeholders from industry, services and trade

In the midst of the concerns on slowing economy and starting of the budget preparation, the Hon’ble FM met leading Industry Chambers as part of pre-Budget discussions. Shri Deepak Sood, Secretary General, ASSOCHAM led the discussions from ASSOCHAM and made the following points. He essentially highlighted the need for direction that the Budget needs to address relating to investor confidence, liquidity – especially in the Financial Sector, including need for developmental financial institution and need for early address of the Telecom stress in the system 

Some of the specific points made included:

Listing of bonds in the market - Unlisted bonds do not provide adequate financial and corporate information. All bonds should be compulsorily listed thereby forcing issuers to regularly share financial and corporate information in public domain. Investors will benefit from greater transparency and accountability of corporate will increase.

Create a liquid and deep Corporate Bond market - Market makers should be allowed in the corporate bond market with access to call money as well as ready forward.  Access to call money will reduce the cost of funds for market makers. 

Improve liquidity in the MSME sector - MSME sector is the backbone of the economy and accounts for 40% of India’s workforce. A major problem faced by MSMEs is the delayed payments against their supplies to large corporates and PSUs. Therefore, improving liquidity at the MSME sector is the need of hour.

National Asset Renewal -  The banks in India have amassed an enormous volume of NPAs over the last decade. These NPAs and stressed assets are accounted for by several thousand industrial units which have very valuable assets in the form of Land and building, Plant and machinery, Technology, Brand, Licenses, concessions and rights, Access to the market, Trained and skilled workforce etc.  Many NPAs and stressed assets have a potential to achieve significant scale, if given proper guidance, right set of leadership, management, human resources and appropriate funding in quantum and structure. Restitution to the original situation could be achieved by country’s high quality and high caliber professional personnel with experience and expertise in various areas. Many of these professionals have a desire and capacity to become entrepreneurs. However, they lack proper encouragement, opportunity, mentoring and financial support that can give them the confidence to take up this challenge.  This proposal attempts to achieve the twin objectives of putting the unutilised/underutilised assets to productive and fruitful usage, as well as to achieve the dream of our professionals to become entrepreneurs.

Recovery mechanism v/s resolution mechanism - IBC was primarily introduced to improve recovery rate and reduce the time in the resolution process. It has performed well on recovery front but it lags behind in completing the resolution in the allocated time frame. There are several programs experimented / being experimented, the latest being the platform of Insolvency and Bankruptcy Code (IBC) to restructure and revive stressed assets. The progress report shows that the outcomes have been mixed, whilst IBC is evolving an evolving fast. The model of legal recovery processes of banks/ financial agencies or other creditors places recovery of debt or dues as primary goal even by liquidation. In summary, statistics and early trends show, IBC working better on recovery than on resolution, while the focus should be on resolution as it generates wealth, employment and resources for reinvestment.

Resolving ILFS Debt for Infrastructure & Economic Growth - India needs infrastructure investment of INR100 lakh-crore, to help India achieve its vision of becoming a US$5 trillion economy by 2024-25, hence easing the burden on this sector becomes more critical. We need to resolve IL&FS issue for this to become reality.

Telecom Sector – Telecom Sector has been going through financial stress in the last 3 years. The recent AGR judgment has further aggravated the stress and lead to an unprecedented financial crisis. While respecting the judgment of the Hon'ble Supreme Court, we urge the Government to intervene to avoid the unprecedented situation across sectors. It is absolutely imperative to address the AGR issue to ensure the continuity of business, investment in the sector and to meet the vision of' Digital lndia'. One suggestion could be to incentivize the telecom sector for investing in the 5G rollout on 1:1 basis. 

One time roll over /Restructuring — In case of stressed assets, vide circular dated June 2019, RBI has permitted the banks to restructure and/or roll over the loans at their option and in such cases the borrower will retain the asset classification of the restructured standard accounts as standard and the same will not be treated as NPA. However, the benefit of the said Circular has not available to the Real Estate Sector and as a result, the restructuring or roll over of the loans to the real Estate Sector triggers the provisions related to NPA. Due to the downturn in the market and also failures of several big NBFC, the developers are facing acute liquidity shortage. We recommend that the banks and Financial Institutions be given discretion to one time restructuring and/or roll over of their existing loans on the lines of loans to other sectors. For the purpose, RBI shall issue the Circular on the lines of similar circular issued on 8th December 2008.

Source: Press Release

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