The Supreme Court on Tuesday asked the finance ministry to inform it about the mechanism in place and steps being taken to recover huge non-performing assets (NPAs) of the nationalised banks. The apex court also asked the government to form an expert panel to look into the issue.
A bench headed by Chief Justice T S Thakur, while seeking response from the RBI and the Indian Banks Association on various issues framed in this regard, said the current system is not working to safeguard the interests of the banks. It said “if your (government) system was perfect, you could not have such huge NPAs”.
“Something is missing (in the current system). Something is not working. Don’t take this as adverse remark. But steps are needed to prevent such huge write-offs. We are looking at suggestions to reform the system and prevent the huge write-offs… Please tell us what is the current institutional mechanism to check it…And what reforms you are intending to bring in,” the bench asked Solicitor General Ranjit Kumar, who informed the court that some “amendments are in the offing. And the Bankruptcy Code is likely to come into effect soon”.
Kumar also told the apex court that the government is already working to contain the bad loan situation and has various mechanisms like the proceedings before the Debt Recovery Tribunals/the Sarfaesi Act to recover the bad debts.
The CJI also told the bank to propose a committee which can look into all these issues. “We are not financial experts and cannot look into the safeguard issues, but the government should be in a position to evolve safeguards to prevent NPAs. If you propose a committee which can go into all these issues, we will be okay with it,” he observed.
Counsel Prashant Bhushan, appearing for NGO Centre for Public Interest Litigation (CPIL), told the judges that there is severe discrepancy with respect to the information on loan write-offs provided by individual banks and the RBI.
Bhushan cited the RBI data that showed Punjab National Bank writing off over `8,500 crore in the last two years, while PNB has denied writing off any loan during this period. Similarly, while the Bank of India claimed that the bank wrote off more than `17,700 crore loans in the last two years, the RBI figure stood at `2,567 crore.
The counsel also filed a two-page note and formulated around 11 issues to be looked into by the court. The issues included — whether the RBI can refuse to disclose information about defaulted loans, suits filed for recovery of loans, restructured loans, debts written off, willful defaulters, one-time-settlement, sales of assets of companies to Asset Reconstruction Companies etc, what mechanisms are required to ensure that banks obtain adequate security for the loans that they give to the companies/corporates and whether the personal guarantees of the promoters should be required to be taken in loans given to the corporates.
The SC had earlier critisised the banks for failing to go after big defaulters and instead driving farmers to sell their small tracts of land and committing suicide for failure to return small outstanding loans.