Bankers must not avoid taking business decisions for fear of facing investigations or penal actions, says minister of state for finance.
Every stressed asset should not be referred for insolvency proceedings and bankers must try out other methods to resolve stress first, Anurag Thakur, minister of state for finance and corporate affairs, said on Wednesday.
“I would request bankers to try and resolve stressed assets in the right earnest and refer cases to NCLT (National Company Law Tribunal) only if satisfied resolution outside the NCLT is not available. We should not use NCLT for every case. This is going to help the business community and banks as well,” Thakur told bankers, speaking at the 72nd annual general meeting of the Indian Banks’ Association (IBA).
Further, Thakur said that bankers must not avoid taking business decisions for fear of facing investigations or penal actions at a future date. “I think we have said it time and again and I will say it again now that I want to assure you that the decisions taken by you in the course of business in good faith with a sound business rationale will not face any witch-hunt,” he said, adding that the government will be meeting bankers to understand the challenges they face at work.
The minister pointed to the Central Vigilance Commission’s recent directions to the effect that the internal advisory committee in banks will classify cases as vigilance and non-vigilance. The directions are aimed at expediting the decision-making process and prevent harassment for genuine commercial decisions by bankers at a time when several senior bankers have been accused of being complicit in frauds.
Thakur asked banks to re-examine their policies with respect to transfers, particularly in the case of women bankers, at a time when 10 banks are set to be merged into four. “In the last three months, a lot of issues about transfer policies have come to our knowledge. My request to IBA would be to look into the transfer and HR (human resources) policies,” Thakur observed. The costs of relocation tend to be high and it is up to banks to look into the matter from that perspective as well, especially in the light of the upcoming mergers, he added.
The government is looking at the four banks that are still under the prompt corrective action (PCA) framework emerging out of it after the forthcoming round of recapitalisation. “After the last tranche of recapitalisation and the increased flow of capital, I expect the remaining four public sector banks (PSBs) to come out of the PCA framework,” Thakur said. The four banks still under PCA are Central Bank of India, IDBI Bank, Indian Overseas Bank and UCO Bank. United Bank of India, also under PCA, is set to be absorbed by Punjab National Bank.
Thakur said despite a 110 basis points repo rate reduction by the Reserve Bank of India over the last few months, banks have not passed on the full benefit to the consumers. “Only a fraction of the rate cuts benefits were passed-on by the banks to borrowers. I appeal to banks to further pass on the benefits of the rate cuts to companies which will lead to an increase in the consumption cycle, thereby, leading to a revival in their investments,” he said.
In August, finance minister Nirmala Sitharaman had announced an “upfront” capital infusion of the budgeted Rs 70,000 crore into PSBs in FY20, departing from the practice of doing it in phases throughout the fiscal.