{"id":1058,"date":"2014-11-24T00:00:00","date_gmt":"2014-11-23T18:30:00","guid":{"rendered":""},"modified":"2015-12-31T10:17:06","modified_gmt":"2015-12-31T04:47:06","slug":"opportunities-for-chartered-accountants-in-stressed-assets","status":"publish","type":"post","link":"https:\/\/taxclick.org\/type\/opportunities\/opportunities-for-chartered-accountants-in-stressed-assets\/","title":{"rendered":"Opportunities for Chartered Accountants in Stressed Assets"},"content":{"rendered":"

Someone\u2019s trash is a treasure for someone else.<\/strong><\/p>\n

 Indian Banks are staring at
\nstaggering NPA of Rs. 3.7 Lac Crore as on June 2014. With the Banking industry
\nis in shock and awe, one can see professional opportunities even in this
\nscenario<\/p>\n

With the mind boggling size of
\nNPAs that the Banking system has in its kitty, the work of curing the defect
\nhas garnered immense importance. I Will explain how and the opportunities for
\nProfessional Chartered Accountants lying there in.<\/p>\n

To understand this let us quickly
\nunderstand the process of identification and disposal of NPAs followed by
\nBanks.<\/p>\n

1.      
\nIdentify an asset as stressed <\/p>\n

2.      
\nExplore options for recovery plan like <\/p>\n

A.      Restructuring
\nof debt<\/p>\n

B.      Change
\nof management <\/p>\n

C.      Sale
\nof assets<\/p>\n

D.      Transfer
\nto ARCs<\/p>\n

Much has been discussed and
\nwritten about the first option of restructuring of Debt. Many of my
\nprofessional colleagues might have been actively working in this area.<\/p>\n

However, the other 3 options I
\nbelieve, have gained importance as restructuring tool has not been that
\neffective. Let us discuss the same:<\/p>\n

Change of Management:<\/strong> once an asset has
\nbeen classified as NPA\/stressed, the bank has one difficult way of resolution
\nin the form of change of management. Please remember that banks can, with the
\nclause in the loan documents can evoke this option in case of event of default
\n(EoD).<\/p>\n

 <\/p>\n

The option is
\ndifficult as generally the existing management may not co-operate and try to
\ncreate obstacles. However, in the toughest situations for the borrower; this
\ncould be one of the wisest options and the borrower may get a breathing time to
\nrecover from the losses or look for options. \u201cChange of Management\u201d with
\nconsent of existing borrower is the best possible option for a bank which may
\nensure minimum losses to banks and somewhat lesser pain to existing borrower.
\nThough, this decision could be situation specific.<\/p>\n

 <\/p>\n

Sale of assets:<\/strong><\/p>\n

When an asset turns
\nbad \/ stressed, the bank may explore the option to sale assets lying as
\nsecurity in the form of a running unit or just the property\/plant &
\nmachinery.<\/p>\n

 <\/p>\n

This process is
\ntime consuming as one will have to follow SARFAESI Act, 2002 which may lead to
\nlitigations.<\/p>\n

 <\/p>\n

Transfer of Assets to Asset Reconstruction
\nCompanies (ARCs):<\/strong><\/p>\n

 <\/strong><\/p>\n

With the
\nprovisions of SARFAESI Act, 2002 Banks can also transfer the stressed assets to
\nARCs which are specialized to handle and manage such assets. ARCs derive their
\nincome from management fees and share in recovery proceeds. With the recent RBI
\nguidelines with 15% upfront contribution by ARCs to transfer an asset instead
\nof 5% as mandated earlier and earning rewards on resolution of Non Performing
\nLoans, only serious ARC players would exist in the business and the focus would
\nbe more on resolution of asset than just being a trustee of stressed assets for
\nbanks and earn management fees. <\/p>\n

 <\/p>\n

 <\/p>\n

Professional
\nOpportunities:<\/strong> <\/p>\n

<\/p>\n