Year 2019 was the year of reckoning for the India Banking Sector. Indian Banks were reeling under a Distress Debt of around USD 200 Billion and were in dire need of debt restructuring and infusion of fresh capital.
Aggressive lending to the Infrastructure Sector in order to prop up the Indian Economy after the years of Great Financial Crisis (2008-2010), and due to various other factors including fraud and diversion of funds, had ultimately resulted in piling up of huge amount of Bad Debts within the Banking Sector. The Government of India, in order to keep a watch on fraudulent activities and to prevent diversion of funds, has introduced the ASM (Agency for Specialized Monitoring) Mechanism. Under the ASM, banks will now appoint specialized monitoring agencies to closely track the activities of the debtor (borrowers) including purchase/invoices, actual production vis-à-vis projections, high value transactions/ payments as regards beneficiaries and purpose, cash inflow/ outflow. The scope includes the following:
- Concurrent review and monitoring the procedures (Working capital)
- Concurrent review and monitoring the procedures (Term loan); preferably deployed in when there is a delay in implementation ASM for large accounts should be engaged in order to ensure proper monitoring of the project implementation as per schedule and end usage of the fund
- Concurrent cash monitoring both – Cash Inflow and Cash outflow monitoring
- Fund Flow analysis
- Non-cash parameters
RBSA with its techno-financial capabilities is rightly placed to offer 360 degree overview to the lenders, with regard to their exposure to large borrowers. We can monitor the progress of implementation/operation of the project on real time basis. We can also monitor the operating and non-operating financial transaction of debtor including cash flow monitoring.
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