Davos WEF 2018: Pace Of Bad Loan Resolution Will Determine Success Of Insolvency Process

ICICI Bank Ltd.'s Chanda Kochhar said that the pace of resolution and recovery of bad loans will determine the success of the insolvency process. “What is going to be the success is how fast we achieve the recovery and what are the underlying values that we get as we do the resolution and recovery,” said the chief executive officer of India's second largest private sector bank.

The bad loan crisis was an outcome of a slowdown in growth, drop in commodity prices, and delay in project implementation, Kochhar told Bloomberg on the sidelines of the World Economic Forum at Davos, Switzerland. “This year is going to be a watershed year in terms cases getting resolved through NCLT.”

The judicial cover under the National Company Law Tribunal gives banks the confidence to take timely decisions, which will help clean up bad loans, she said.

Also, structural reforms like the Goods and Services Tax and demonetisation are driving financialisation of savings and formalisation of the economy. The reforms, she said, have brought in savings from the informal to the formal sector, which has also led to an increase in public issuances.

Also Read: Davos 2018: Uday Kotak Says Allowing 100% Foreign Holding In Banks ‘Not A Great Idea'

The ICICI Bank chief said retail and consumer segments of banks are improving. Technological innovation through use of payment systems has also helped.

Inflation, she said, is going to move up, but not too soon, and will remain within the central bank's acceptable levels. “The reduction in interest rate cycle has stopped now.”