The Supreme Court on Friday asked the Reserve bank of India for information on what steps it will take to implement the high level committee’s recommendations to tackle bad loans. A bench headed by chief justice JS Khehar while seeking response from the banking regulator to clarify on disclosure of names of big defaulters observed that defaulters cannot be exonerated via insolvency proceedings.
The five-member high-level committee comprising RBI executive director and other top brass of public sector banks had last month given final recommendations on banking reforms, including steps being taken to recover huge non-performing assets (NPAs) of the nationalised banks. The panel had suggested that promoters should be personally made liable if funds were siphoned. Even a company should consider securing corporate guarantees on behalf of direct subsidiaries and fast-track courts should be set up for while collar frauds, the panel had recommended.
RBI senior counsel JL Gupta informed the court that the government on Friday notified an Ordinance to amend the Banking Regulations Act and that will empower the RBI and banks to initiate bankruptcy proceedings against loan defaulters. The ‘revolutionary legislation’ empowers the RBI to act directly against top loan defaulters, Gupta said. The apex court posted the matter for further hearing on July 17.
The Cabinet had on Tuesday had recommended the Ordinance empowering the RBI to instruct banks to act against top 20-25 loan defaulters as part of a series of steps aimed at helping lenders get bad debt off their books. Sale of assets, closure of non-profitable branches, reduction of overhead costs and business turnaround initiatives are part of the resolution process.
While the government in its reply has admitted that the total amount of loan default is Rs 5 lakh crore in 70,000 cases of non-payment, it refrained from making public the names of the big loan defaulters, and submitted the list in a sealed envelope.
While hearing the PIL by the CPIL, the Supreme Court had in March last year taken suo motu cognizance of a newspaper report that Rs 1.14 lakh crore of bad loans had been written off by state-owned banks between 2013 and 2015.
The petition, which was filed in 2003 by the NGO, had originally raised the issue of loans advanced to some companies by state-owned Hudco.