Page 31 - Banking Finance July 2019

ARTICLE

Company A steps up, then it will bag the power plant at government may did not even think of. The method was
Rs.5,500 crore. upheld by the Supreme Court of India for awarding public
projects and the Government of India has tried out this
Why is it important? method in road and railway projects.
The ‘Swiss Challenge’ allows a seller to mix-and-match the
If ‘Swiss Challenge’ is applied to bankruptcy cases, banks
features of both an open auction and a closed tender to
may get to squeeze out more from the auction of stressed
discover the best price for an asset. In the recent bankruptcy
assets.
proceedings of Binani Cements, Indian banks came up
against a sticky situation where UltraTech Cements bettered
If applied to public projects, it may lead to more innovative
the winning bid by the Dalmia group, after the official
project proposals and quicker execution, as a bidder with a
bidding process came to an end. Bankers predictably were
good idea needn't wait for the government to set the ball
all for relaxing the rules a little bit if it meant more money
rolling. But on the flip side, by allowing a bidder to initiate
in their coffers. But this position was legally challenged by
an idea and giving him the first right of refusal, the ‘Swiss
the Dalmias.
Challenge’ can promote favouritism in the award of public
projects, opening the doors to corruption. To guard against
Conclusion
this, legal experts suggest an open list of public projects that
The Swiss Challenge method would solve this problem by allow Swiss Challenge and full public disclosure of bid details
allowing for two rounds of bidding. The method also has when the government receives a proposal.
other uses. In its original form, a ‘Swiss Challenge’ allows
an infrastructure developer to come up with a suo motu
The bottom-line
proposal for a new project without waiting for the
The Swiss know how to get more bang
government to call for bids. This can foster innovation, as
contractors or developers may initiate projects that the for the buck.

PNB admits loan defaults of Rs 25,090 cr

The Punjab National Bank has admitted to 1,142 defaulters all over the nation who have defaulted to the tune of Rs
25,090.3 crore. The initiative of recovery proceedings has been taken by the bank by filing suits against 1,108 default-
ers out of them. The amount expected to be recovered from these cases is Rs 23,879.8 crore.
The rest 34 owe the bank Rs 1,210.5 crore. However, no suits have been filed against them so far. Some of them are
several years old and recoveries are still pending. The RBI has also received information regarding the status of all the
defaulter accounts.

The defaulter list is inclusive of accounts owing Rs 25 lakh or above to PNB through all its branches all over the coun-
try. The highest number of defaulter accounts has been tracked from Maharashtra, Punjab, Delhi, Chandigarh, Gujarat,
Uttar Pradesh and West Bengal.
In addition, some companies who availed some of these loans are shown as registered abroad, while some registered
in India have taken loans from PNB's overseas branches. The list Kingfisher Chief Vijay Mallya owing Rs 597.4 crore to
the bank on the defunct airline's account. Other defaulters include Kudos Chemie Ltd., Chandigarh for Rs 1,301.8
crore, Winsome Diamonds & Jewellery Ltd for Rs 899.7 crore, Jas Infrastructure & Power Ltd., Kolkata for Rs 410.9
crore, Zoom Developers Pvt. Ltd. Mumbai/Indore Rs 410.1 crore.
The All India Bank Employees Association General Secretary CH Venkatachalam said, "It is not confined to one bank
and all banks have such bad loan accounts. A bulk of defaulters is corporates or big companies and a forensic audit of
all should be carried out. Why can't the bank file criminal cases against the big-time willful defaulters instead of merely
civil suits which can drag on for years?"

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