Bank NPAs: Must go beyond naming and shaming, SC should fast-track cases

By: |
October 28, 2016 6:25 AM

Would help more if SC fast-tracked defaulter cases

Given how rapidly bank NPAs are rising, it is not surprising the Supreme Court should once again be reiterating its demand for making public the names of big defaulters—those owing banks more than R500 crore. While the Court had earlier asked the central banks to give the names of these defaulters, these had been submitted in sealed envelope—RBI had strongly argued against making these public, saying that all defaulters were not necessarily doing this deliberately and there could be genuine business reasons for not being able to repay loans. RBI also cited various aspects in the law that prevented making such information public, a point reiterated by the government counsel earlier this week. While this would suggest the names of 57 defaulters who owed R85,000 crore to banks would not be made public, an easy way around is to reveal the names of the willful defaulters whose outstanding loans also add up to a fair amount. Of course, this may leave out the really big fish since, in a large number of cases, banks have found ways to give them fresh loans to ensure they don’t default—a default would just increase the provisioning the banks would have to do.

While the Chief Justice will decide on this next month, it is not clear how much naming-and-shaming will achieve given how brazen many of these defaulters are. After the initial offer, Vijay Mallya has not, for instance, made any new offer to settle with banks. And many others, whose names appear in newspapers regularly, continue to use the court process to obstruct the banks. In which case, Chief Justice TS Thakur who is hearing the case may like to take a different tack apart from just naming-and-shaming. Since defaulters get a large part of their power from being able to go to various courts, and then appeal their judgments, it would make a big difference if the Chief Justice were to transfer all the cases—of perhaps one or two big defaulters—to the Supreme Court and assign a special bench to hear them on a daily basis. Once the banks are able to attain closure on even one or two big defaulters, a very strong message will go out to all defaulters. The insolvency Bill, it is true, is expected to make life easier for banks but it will take at least a year to really get the process started since there are various lacunae in the law that have been pointed out—the Supreme Court could bridge the gap in at least a few cases.

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