Public sector banks seeking to honestly address the problem of non-performing assets through certain steps are facing the anxiety of being questioned about their decisions by probe agencies years later, Finance Minister Arun Jaitley said today. During a discussion on the Banking Regulation (Amendment) Bill, 2017, in the Lok Sabha, Jaitley called for a political concensus and will to address the problem of mounting non- performing assets (NPAs) of the public sector banks. Talking about steps against certain wilful defaulters, he asserted that banks will take action against those involved in frauds. He also said that RBI may refer more cases to the banks to intitiate insolvency proceedings against defaulters. The Banking Regulation bill seeks to replace an ordinance which had conferred powers on the Centre to authorise the Reserve Bank of India to issue directions to banks to initiate insolvency proceedings against loan defaulters. Jaitley said provisions under the Section 13 of the Prevention of Corruption Act are deterring certain banks from taking honest decisions to take innovative steps to address the problem of the stressed assets as they may be viewed as erroneous from a historical perspective years later.
The finance minister said the pre-liberalisation-era law can be extended to decisions taken with an honest approach and that is why there is apprehensions among certain banks. He said certain laws have become obsolete. A strong banking system is essential to support economic growth and the government is determined to achieve it, he said.
Jaitley identified steel, textile and road infrastructure sectors as major contributors to NPAs and cited reasons for stress on them. He said steel sector globally faced difficulty due to surplus steel production by China and it impacted Indian industry as well. In case of power sector, he referred to NPAs generated by state electricity distribution firms.
Jaitley indicated that RBI may ask banks to refer more cases to the banks for taking up insolvency processes. He said taking over certain power plants and textile companies which have defaulted on payments to banks will not solve the problem as it would be difficult for the government to run them. In this context, he talked about ways to deal with the problem of stressed assets and said asset recovery companies (ARC) can play a bigger role in reviving companies which have been closed down. He said ARCs can revive the companies facing financial difficulty. “We are taking steps to promote ARCs,” Jaitley said.
Earlier, participating in the discussion on the Bill, a number of MPs including from BJP, demanded action against big corporate defaulters. They said wilful defaulters must be punished and the money owed by them must be recovered. Varaprasad Rao of YSR Congress said 90 per cent of the NPAs are by large corporates and government must take action against those involved in collective swindling of public money. Prem Singh Chandumajra of Akali Dal said though Rs 8 lakh crore is the official figure of NPAs of the banks, unofficially the amount is around 14 lakh crore.