Economic malaise in India and corporate debt restructuring

The need of the hour is arriving at just and equitable solutions for the revival of viable borrowers when both the lenders and borrowers share losses in equal measure and not resort to one-upmanship

The present condition of sky-rocketing food prices driven hyperinflation goes way back to 2006 through 2008 following rapid-fire economic cycles of boom, recession and stimulus-driven revival bringing it now to sheer stagflation accentuated by total policy paralysis, utterly bad governance coupled with trust deficit at the national level.To blame the slowdown in the West and coalition compulsions at home is absolutely fallacious and ridiculous. The United Progressive Alliance’s (UPA) flawed policies are the root cause for the current malaise.


The so-called heady boom of that period gave a kick-start to the demand for risk equity capital when investment and merchant bankers had field day raising initial public offerings, follow-up on public offers, qualified institutional placements, private equity investments and foreign institutional investors that flooded eastwards from the Western financial markets consequent upon the Western meltdown. Our markets were deluged with funds of all hues and colours, legitimate and illegitimate irrespective of enterprise valuations (EVs) which invariably appeared many a times astronomical!


 Following the post-Lehman crisis, beginning 2009 the markets lost their euphoria and sheen. Raising equity at high EVs became difficult and capital-intensive industries in engineering, procurement, reality, infrastructure and power had to go in for large-scale debt-funding via term borrowings from commercial banks and developmental finance institutions, increasingly present NBFCs and also external commercial borrowings.


The Reserve Bank of India (RBI), concerned with high inflation resorted to raising the key repo and reverse repo rates a record 13 times since March 2010 only to slow down now! This made debt servicing for the industries more expensive. Suffocated with high interest rates, defaults in interest and installments began to become the order of the day. The heady boom having come to an abrupt end, the focus has now shifted to numbers of bad loans or distressed assets as they are termed in the West.


This brought in an era of corporate debt restructuring (CDR), now denoted Greening of loans (!) It seeks to recognize impairment by allowing the reorganization of outstanding debt obligations by bringing about reductions in the burden of the mounting/compounding debts—lessening in the interest rates and rescheduling the installments by extending the term of repayment. This enables increase in the ability of the borrower to meet debt obligations by letting the lender waive in part or forgive or convert a part of debt into equity.


To prevent abuse by delinquent borrowers, the RBI-appointed Mahapatra Committee in its fairly comprehensive report, quoting best practices across the globe, has rightly stipulated that the CDR request be approved by at least 75% of total exposure and consent of 60% of the total creditors. As per the recommendations, the promoter-directors are mandatorily required to infuse 15% of their own additional equity upfront to enhance their personal stake in the restructuring exercise. To revive the entities it is absolutely imperative that both the lenders and borrowers sacrifice in equal measure. The promoter-directors cannot be allowed to walk away in gay abandon with the cream of past malpractices when the lenders have to bear the brunt of write-off burden. This avenue has been unfairly exploited by a private airline to get its massive debt converted into equity at inflated valuations by at least half a dozen large commercial banks! So much for implementing and enforcing the rule of the law by the banking and market regulators!


According to the CDR Cell, during fiscal 2012 banks have restructured Rs 64,500 crore—an increase of 156% over the previous year— when the banks filed 84 cases.  This makes restructuring the highest since its launch in 2001. It has helped revive the macro-economic conditions for both the banks by promptly recognizing and providing for the impairment of their non-performing assets well in time. The borrowers are also able to reduce their interest and principal debt burdens by providing for sufficient breathing space to genuinely viable units to enable them to bring about a turnaround without having to resort to tedious DRT and court procedures or end in winding up proceedings.


The Hindu Business Line in a front page report said: “Wockhardt ready to exit debt recast process”. It reports that the company had first sought the CDR lifeline through ICICI Bank in 2009 when it defaulted on the $110 million FCCB (foreign currency convertible bond) that made worst its outstanding debts of Rs3,400 crore and Rs1,300cr under CDR.  According to chairman Habil Khorakiwala all loans had been restructured and it would settle with the banks that do not want to continue with the CDR process. The company had to close a Rs1,600 crore deal to sell its nutrition business to Danone to repay the debts. It had already exited its non-core businesses as part of regaining financial health.


The Apparel Export Promotion Council (AEPC) has sought the finance minister’s help in restructuring loans —out of total outstanding debts of the textile sector of Rs1,55,809 crore, debts of Rs35,000 crore needed restructuring. Its chairman has requested the RBI (Reserve Bank of India) and the Department of Financial Services to give directions for the restructuring move.                        


The CDR route for debt mitigation has also been found to be unfairly exploited by Kingfisher, a private airline, by getting a part of its massive debt to banks converted into equity at inflated valuations. So much for implementing and enforcing the rule of the law by the banking and market regulators!


The need of the hour is arriving at just and equitable  solutions for the revival of viable borrowers when both the lenders and borrowers share losses in equal measure and not resort to one-upmanship—the borrower enjoying on misused/misapplied bank funds on the one hand and on the other, a vindictive lending bank seeking to squeeze the hapless borrower, more often than not small traders, SMEs, householders, vehicle loan or even a delinquent credit card defaulters who may have valid reasons and only seek additional time and concessions. There is no reason why the concessions are not extended to these small time borrowers where banks resort to extortionist recovery and attachment proceedings while dealing with big ticket chronic delinquent defaulters with kid gloves by bending backwards with concessions.


Rightly put by a veteran banker—when a small man owes a few thousands to a bank, he is in deep trouble but when a big tycoon has outstandings running into crores with the bank, it is the bank that faces the music! 


(Nagesh Kini is a Mumbai based chartered accountant turned activist.)


Pratibha Patil’s Museum: Gifts received by VVIPs from foreign countries can be purchased by them but can they be loaned?

Why couldn’t outgoing President Pratibha Patil follow the norms like other VVIPs and buy the gifts she received officially, instead of getting them loaned to her proposed museum?

Gifts which VVIPs including President of India receive during their official foreign tours are the property of the nation and are deposited in the government treasury called the Toshakhana.  They can be purchased at market value by the VVIPs, if they so wish. In fact, according to the ministry of external affairs, “the total amount collected by the government by allowing retention of gifts by VVIPs during past three years and the current year is Rs62,000.” So, why couldn’t outgoing President Pratibha Patil follow the ministry’s norms and buy whichever gifts she received officially instead of having them free of cost?


The notification of the ministry of home affairs dated22 June 1978 does not mention anything about giving away such gifts on loans to the respective VVIPs. However, around 155 gift items which Pratibha Patil received during her tenure as President of India have now been ‘loaned’ to the collector of Amravati, where Ms Patil’s family trust is building a museum to showcase her political journey.


Earlier VVIPs which include presidents, vice-presidents and ministers, could retain gifts that they receive on foreign trips which are valued at Rs1,000 and that too can take home only one such gift in case they receive more than one on a particular tour. In an amendment made by the ministry of home affairs in 1999, the amount has been increased to Rs5,000 and the VVIP can purchase the gift item as per the market value of the “country of origin” over and above that amount. This means that the VVIP can retain any gift he or she receives during official tours abroad free of cost in case the value is Rs5,000 and below. However, if he or she wishes to possess any other gift which is beyond this amount then, he or she will have to pay the market price as valued by the ministry of external affairs.


In a written agreement signed between the Presidential Estate and the Collector of Amravati, the 155 gifts out of the 2,500 gifts that Pratibha Patil received in her tenure as the President of India, have been ‘loaned’ to her trust for a museum under-construction, in her hometown in Amravati, without any time frame for returning them to the Rashtrapati Bhavan’s ‘Toshakhana’ (treasury).


Ms Patil, who courted controversy and impropriety in terms of grabbing a sprawling 2,42,000 sq ft defence land for her luxurious post-retirement home in Pune (which she abandoned after a series of articles in Moneylife) and for having spent Rs200 crore on her foreign trips with an entourage of family members in practically every trip, is now all set for another bad precedence, where propriety too is being questioned.


As per the last notification of the ministry of home affairs dated 27 January 1999, “In regulation of the foreign contribution (acceptance or retention of gifts or presentation regulation 1978 in sub-regulation (1) the following proviso shall be inserted namely: provided that a minister my retain a gift or presentation made to him/her provided the value of the gift assessed under sub-regulation 5 does not exceed Rs5,000.” There is no mention of loaning out of these gifts to the individual after retirement which are received in the official capacity of the VVIP, on behalf of the entire nation.


The above reply was given in the Lok Sabha on 2 May 2012 by Praneet Kaur, minister of state in the ministry of external affairs (MEA), to a series of questions asked by Members of Parliament DB Chandre Gowde, Karnataka and Abdul Rahman, Tamil Nadu, in the Lok Sabha. The questions posed by these two MPs were:

  1. whether the government has laid down any extensive guidelines with regard to gifts received by VVIPs during their foreign visits which are funded by the Union Government
  2. if so, the details thereof;
  3. the details of VVIPs who went on official visits to foreign countries during the last three years and the current year using public money and the details of the gifts received by them, VVIP-wise
  4. the details of the VVIPs who declared the gifts and deposited the same with the government and who did not declare the gifts received by them during the above period
  5. the total amount of daily allowance paid to these VVIPs by the Indian missions/embassies abroad during the above period
  6. the total amount earned by the government by selling/disposing of the gifts deposited by the VVIPs and
  7. the steps taken by the government to ensure that the gifts received by the VVIPs are declared and deposited in the government Toshakhana

While most of the information for the above questions are still being compiled, as stated by Ms Kaur in her reply: “the information is being compiled and will be laid on the Table of the House as soon as it is available and that, none of the gifts deposited in Toshakhana by the VVIPs was sold. The total amount collected by government by allowing retention of gifts by VVIPs during past three years and the current year is Rs 62,000.”


This writer has invoked the RTI (Right to Information) Act and sent off an application under Section 6 of the RTI Act  to the Central Public Information Officer in the President of India’s office on 3rd August. While reply is awaited, I request each one of you who reads this article to independently send a similar RTI query which will ensure citizen pressure, enough to compel the CPIO to reveal the required information from the august office.

Central Public Information Officer

                        Shri Saurabh Vijay,

                       Central Public Information Officer

                       President's Secretariat

                       Rashtrapati Bhavan

                       New Delhi-110004

                       Telephones: 011-23015321 Extn: 4685(O)



        Full name of the applicant:

            Vinita Vishwas Deshmukh

            123/8, Mira Society

            Salisbury Park



       Date: August 3, 2011

        Subject matter of information:

        President of India’s gift articles loaned for display

        Details of information:

  1. Copies of rules/GRs/amendments/correspondence for rules and amended rules regarding gift articles and souvenirs which are received by Presidents of India from other countries and within the country
  2. Copy of rules and regulations for ‘loaning’ official gifts received by President of India to presidents on their retirement or loaned to any other organisation.
  3. Copies of requests made by Presidents of India for loan of gifts for display at their post-retirement residences or any other place outside the Rashtrapati Bhavan. Give names of the presidents and list of gift articles loaned to them
  4. Copies of official requests made by Presidents of India for loaning of gifts from 1990 onwards. Provide copies of all such correspondence within the President of India office as well as between President of India office and the relevant district/city authority where the President of India may have resided or the place where she/he wants to display the loaned gift items, form 1990 onwards
  5. Copies of official requests made specifically by Ms Pratibha Patil to President of India office and correspondence between President of India’s office and ministry of external affairs (MEA) and collector, Amravati, Maharashtra regarding loaning of a number of gift items for a museum in Amravati.
  6. List of gift items loaned specifically to Ms Patil along with the evaluated price of each item, from which country did each gift item come from, what was the purpose of her visit when she received each of the gift item
  7. How many gift items in total does the ‘Toshakhana’ of the president’s office have at the moment and what is the total amount in value

Period of information:

1990 to 2012


Whether information is required by post or in person:

By registered post at the above address

Simultaneously please scan and email all the certified documents at [email protected].


Thanking you in advance and requesting you to send me the information as early as possible.


Yours Sincerely

Vinita Deshmukh

123/8, Mira Society

Salisbury Park



 Rules when VVIPs receive gifts from abroad on official visits (ministry of home affairs notification, 22 June 1978)

  1. Where such person receives any foreign contribution by way of gift or presentation, he shall within 30 days of the receipt thereof , intimate to the secretary, to the Government of India, in the ministry of home affairs/ministry of external affairs and the ministry or the department of the Government of India sponsoring the delegation of which he is a member in writing –
  1. The fact of his having received of such gift or presentation
  2. The foreign source from which it is received
  3. Its approximate market value in India
  4. The place in which and the date on which it is received; and
  5. Such other details relating there to as he may, in the circumstances consider appropriate;

Provided that in case where such person received such gift or presentation while he is visiting any foreign country or territory outside India such intimation may be made by him within 30 days from the date of his return of India.


2. Every gift or presentation received by such persons for any foreign source shall be deposited by him with the secretary to Government of India in a ministry or the department which has sponsored that delegation of which he was the member within 30 days from the date of intimation by him of such receipt under sub-regulation (2).


3. The secretary to the Government of India, referred to in sub-regulation 3 shall forward every such gift or presentation deposited with him to the Toshakhana in the ministry of external affairs for assessment of its market value in India.


4. Such assessment shall be made within 30 days from the date of receipt of the gift or presentation in the Toshakhana in accordance with the rules applicable, for the time being in force to the valuation of articles in the Toshakhana and such persons shall be intimated in writing of such assessment forthwith.


5. The assessment so made under sub-regulation 5 shall be final and shall not be called in question by such person.


6. Every such gift or presentation the market value in India of which as assessed under sub-regulation 5 does not exceed Rs1,000 (now it is Rs 5,000) shall be returned to such person for retention by him;


8. Every such gift or presentation the market value in India of which (now it is market value of the country of origin), as assessed under sub-regulation 5 exceeds Rs1,000 shall be retained in the Toshakhana;

Provided such person shall have the option that exercised by him within 30 days from the date of receipt by him of the intimation under sub-regulation 5 to purchase such gift or presentation on payment of the difference between the market value in India of such gift or presentation as assessed under sub-regulation 5 and Rs1,000 (now Rs5,000); provided further that the option once exercised under this sub-regulation SHALL be final.


(Vinita Deshmukh is the consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting which she won twice in 1998 and 2005 and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte” with Vinita Kamte. She can be reached at [email protected])



Mun Mohan Kale

5 years ago

Madam Pratibha's fame is well known. She had not rendered accounts for the MPLAD she received earlier even though years have elapsed. I think BJP was after her & to make her escape Madam Sonia made her President (well, the first woman president!). It was being said that the amount was donated to a trust which was being run by her husband, Devising Shekawat.(A fine ruse to oppose Opposition Presidential candidate Shekawat. I may be corrected if I am wrong,). She extensively toured the world as President (she led a trade delegation to SA just before demitting office!). We made a big fanfare of her being a woman president even though there are many better, dignified women who could have adorned the post with aplomb. She adorned the homes of Indira & Sonia Gandhi better for which she got the reward. A quote from English describes her -"SOME ARE BORN GREAT, SOME ACHIEVE GREATNESS, & UPON SOME GREATNESS IS THRUST" and she belongs to the last.

Nagabhushanam K

5 years ago

It only shows that person like Pratibha Patil can rise to occupy highest position of President of India, but can't overcome her greediness.


5 years ago

Madam Deshmukh - One more article which made public the gift articles of VVIP for which country has ownership rights. I do not remember any controversery and/or news after retirement of Dr.Rajendra Prasad/ Dr.Sarvapalli R /Dr.Zakir Hussain/ Dr.Kalam and country still adores them.

Indi Banker

5 years ago

Good work !! 'Kalam-Wali-Bai'

This is like putting a ladder against the neck of the camel, climbing up and slapping it. he ! he ! he !

I am 200% sending this RTI on monday and urge all the readers to spend Rs 10 on the IPO and another Rs 20 on stationary and pastage and 20 minutes from their busy schedule to send this RTI.

More people need to join the RTI Movement to expose the 'Manmani' of the public servants, enjoying at taxpayers money.


5 years ago

What Ms Patil has done only shows her character. Saying goes, a Dog's Tail can't be made straight, no matter what you do. Same holds good for our politicians also...

J&K Bank Q2 net profit jumps 38% to Rs246 crore on other incomes

J&K Bank's core net interest income rose 22.6% to Rs536 crore while the non-interest income component jumped nearly 41% to Rs421.79 crore in the June quarter

Mumbai: Private sector lender Jammu & Kashmir Bank reported a 38% jump in net profit at Rs246.1 crore in the second quarter ended 30th June, up from Rs182.29 crore in the same period last fiscal, driven primarily by other income, reports PTI.


The Srinagar-headquartered lender's core net interest income rose 22.6% to Rs536 crore during the reporting quarter, while the non-interest income component jumped nearly 41% to Rs421.79 crore, the bank said in a statement.


It registered a 24.8% jump in operating income to Rs629.37 crore from Rs504.20 crore a year ago.


However, the bank saw its net interest margin dip to 3.8% during the quarter from 4% Y-o-Y.


The share of low-cost current and saving account (CASA) deposits slipped to 38.7% of the total deposit base from 40.4% a year ago.


The bank registered a 25.8% growth in credit at Rs33,225.3 crore, while deposits were up 23.3% at Rs53,117.10 crore.


On the asset quality front, the net non-performing asset ratio improved to 0.14% from 0.22% a year ago. Total capital adequacy ratio stood at 13.75% as per Basel-II norms, the statement said.


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