Asset reconstruction companies to take over KFC debts

THIRUVANANTHAPURAM: The highly liberal one-time settlement negotiations conducted by Kerala Financial Corporation on Tuesday to unburden itself of its fattening non-performing assets (now an unsustainable Rs 700-odd crore) might fetch the state just about Rs 100 crore. Nonetheless, the KFC, which wants its manpower for more productive purposes, has no plans to send its men after defaulting units for the recovery of assets. Instead, the plan is to hand over the non-performing assets of the Corporation to asset reconstruction companies (ARCs). Finance minister Dr T.M. Thomas Isaac is favourable to the idea. 

“Recovery proceedings are taking up most of the time of KFC officials,” a top KFC official said. “Over 80 percent of KFC staff is now used for recovery proceedings. It is time the KFC officers are freed for new business initiatives,” he added. The selected ARCs will purchase all of KFC’s NPAs for a price, leaving the Corporation free of the recovery hassle. The KFC’s gross NPA, which was less than 5 percent five years ago, had shot up to 10.57 in 2015-16. However, it had marginally declined to 8.51 percent in 2016-17.

“The objective is to strengthen the Corporation's balance sheet,” the KFC chairman and managing director Mr Sanjeev Kaushik said. “We need to clean up our balance sheet to become more competitive,” he added. A unit is classified non-performing when it fails to pay the monthly instalments for three months in a row. Such a unit is then sought to be rehabilitated for one year, and during this period it is called a ‘sub-standard’ asset. If the unit fails to pay the instalment even after the rehabilitation period, the asset is classified ‘doubtful’. After this the options are two: recovery or settlement.

“Recovery is a process we cannot afford at a stage when increasing competitiveness is inevitable,” a top KFC official said. Even the liberal settlement scheme, in which penal interest has been done away with and the defaulter needs to pay just 1.5 percent of the original loan amount, has not inspired all defaulters to pay up and leave. “There are many who have not accepted even such an unprecedented settlement offer. Some don’t have the money and some demand more relief,” the official said. It is these assets that will be handed over to the ARCs. Though the KFC had received nearly 480 applications for the OTS scheme, it took up just 300 on Tuesday.