27 November, 2020

Good Intent Need Not Be So Taxing

The government is ­absolutely right that we have to deal with defaulters and over-leveraged companies by assessing the probability of recovery, or else file for bankruptcy.

Good Intent Need Not Be So Taxing
outlookindia.com
2019-08-23T12:48:25+05:30

Most businesses are suffering from being over-leveraged, causing them to default on payments. When I say over-leveraged, it means you have borrowed beyond your means. Your business doesn’t have the capacity to sustain the borrowings. These days, banks are wary of defaulters. When banks demand payments and realise that businesses don’t have the means to pay back, it creates distress. Under normal circumstances, such businesses should file for bankruptcy, but no Indian businessman wants to do that. They would like to basically try and survive as long as they can. They are in denial.

The bankruptcy code is specifically meant to deal with business failure and it should be the preferred way to deal with unviable businesses. I believe it is a big economic reform. The government is ­absolutely right that we have to deal with defaulters and over-leveraged companies by assessing the probability of recovery, or else file for bankruptcy. What is happening instead is that all regulatory agencies swing into action and start demanding that it is now payback time. When...

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