Worse form of Congi and AAPTards are those who come back with the lie of loan write offs for corporates.
Who can't differentiate between the balance sheet clean up of banks on the assets side, vs the liability of the debtor and that the first doesnt lead to the 2nd.
Who can't differentiate between the balance sheet clean up of banks on the assets side, vs the liability of the debtor and that the first doesnt lead to the 2nd.
Banks carry systemic risks for the entire financial system and hence one bank with a balance sheet having these UPA era bad loans going bankrupt can affect not only the retail depositors, but also the economy.
Hence their balance sheet has be kept clean.
Hence their balance sheet has be kept clean.
Bank raises equity from shareholders, deposits from depositors and money from other sources, which it lists as liabilities.
The loans that it disburses to debtors is listed as Asset on the balance sheet.
The loans that it disburses to debtors is listed as Asset on the balance sheet.
If these loans are not being serviced, then while on paper the balance sheet and hence the bank would look good, but it would carry the risk of going down anytime.
And hence the regulator requires the bank to identify and purge such assets as per the criteria.
And hence the regulator requires the bank to identify and purge such assets as per the criteria.
However, the bank cleaning up the balance sheet does not writes off the liability of the debtor. The debtor (the corporate which borrowed) is still liable and as as per the new bankruptcy law, the promoters will lose company; Jaypee, Bhushan and so on.
Businesses fail would over and banks (creditors) do lose money when that happen. This is normal business.
What Modi Govt changed is that the bankruptcy laws ensure that the promoters are losing their shirt in the process and not going scott free like in Indira-Rajiv-Sonia era.
What Modi Govt changed is that the bankruptcy laws ensure that the promoters are losing their shirt in the process and not going scott free like in Indira-Rajiv-Sonia era.
And lastly, the concept of limited liability.
In spite of all the cleanup by the Modi Govt, not all of the UPA era loans can be recovered.
Only to the extent that the debtors have the assets. And that's how capitalism globally works in the best rule based economies.
In spite of all the cleanup by the Modi Govt, not all of the UPA era loans can be recovered.
Only to the extent that the debtors have the assets. And that's how capitalism globally works in the best rule based economies.
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