RBI may give loan waiver detail tomorrow

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: Feb 21 2013, 06:31am hrs
SC not impressed by RBIs response on one-time settlements between banks, defaulters

The RBI is expected to provide details of loans waived by banks or one-time settlements above R10 crore by them by Friday, following a Supreme Court direction to this effect last month.

Such information, collected by RBI on the basis of annual financial inspections, is to be furnished in a sealed cover as the central bank is reluctant to put such information in the public domain.

The apex court sought these details from the central bank, as it was not impressed by the RBIs response on one-time settlements entered into by banks with loan defaulters. The matter is coming up for hearing on Friday.

Further details were sought after the apex court expressed dissatisfaction at the information furnished by RBI on last hearing in January. It noted that RBI information was insufficient for determination of the issue raised in the present petitions one-time compromise settlements are being made by the banks ignoring the guidelines issued by the RBI. Accordingly, the guidelines, already issued, are not sufficient to regulate and check on ad hoc one-time settlements.

Pursuant to the apex courts order of August last year, RBI had filed an additional affidavit stating that to ensure compliance with regulatory guidelines in regard to re-payment of the loans, the department of banking conducts annual financial inspections on sample basis. After such inspections, discussions are held with the concerned banks and top management on the critical observations, RBI senior counsel Jaideep Gupta said, adding the banks' compliance with RBI guidelines was closely monitored through periodical reports.

And if any violation of the guidelines was observed, RBI was empowered to impose monetary penalty under Section 47A of the Banking Regulation Act, 1949, the affidavit said. However, RBI conceded that so far no monetary penalty has been imposed on any bank for non-compliance with the guidelines on one-time settlements/compromise settlements as the violations/irregularities, as observed in annual financial inspections, were neither serious nor material in the overall context, RBI added.

However, the finance ministry had stated that it was not feasible to micromanage and scrutinise every such settlement. The RBI and ministrys response had come in a petition filed by Mumbai-based Shoaib Richie Sequeiras alleging non-existence of guidelines by the finance ministry and the RBI while writing off loans by banks.

Last year, the SC had sought RBI response on its role in regulating public sector banks on the non-recovery, one-time settlement and write offs, and the steps taken by it to address rising NPAs.