MUMBAI, February 20: The Federation of Indian Chambers of Commerce and Industry (Ficci) on Friday said the new government should allow "recycling" of assets if a sick industrial unit was heading for a shutdown."The restructuring as part of the reform process will see a number of units falling sick as is happening in South-east Asian countries and the companies should be allowed to recycle the assets of sick units to avoid such a crisis spilling over to the banking sector," Ficci president K K Modi.
Addressing the media after the executive committee meeting of Ficci here, Modi said closing of a sick unit was currently termed illegal. "When a unit is sick and obsolete, it should be allowed to close down after its workers are adequately compensated and the assets recycled for engaging them in some other activity. A crisis in the manufacturing sector will lead to a banking crisis if the asset recycling norms are not revised. It may take seven to eight years for the South-east Asian countries to come out ofthe crisis. The same situation should not be repeated in India."
He said that one of the important tasks before the new government at the Centre was to open up the life and general insurance sectors completely. The ideal format of liberalisation should be through joint ventures with Indian majority ownership as in the case of telecom sector which has attracted many world majors.
Modi also said the banks' NPAs would increase due to dual control of banking -- from the RBI and the union government because of directed lending."Removal of dual control of banks may not control more scams in the banking sector, but we may have to live with it," he said in reply to a query. Toavoid South-east Asian kind of financial crisis, the banking sector shouldonly heed to the directives of the central bank and not that of thegovernment, Modi said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
