Despite the Reserve Bank of India's (RBI) hard talks against loan defaulters, banks are expecting more pain in terms of asset quality as the systemic gaps allow bad borrowers to divert funds and go scot-free under the garb of economic slowdown. Bankers said this trend has almost become viral and put an added stress on the bad loan scenario which has anyway been weighed down by slower economic expansion.
It's also a common refrain from bankers that borrowers misuse the debt restructuring facility and use the banking system to recapitalise their failed ventures. Rajan has declared a war against defaulters by saying that promoters do not have a divine right to continue if an enterprise flops, but the existing legal and administrative gaps have created enough doubts in the mind of a banker that nobody is expecting a quick-fix solution to the spiralling NPA situation.
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