The Supreme Court’s directive to the Reserve Bank of India, to furnish the names of loan defaulters who owe more than Rs 500 crore to 29 public sector banks, is a half measure because it comes with the proviso that the list be presented in a sealed envelope.
This is appalling as it is only because of an RTI query that the nation has learnt that our public sector banks quietly wrote off accumulated bad debts to the tune of Rs 1.14 lakh crore, taken between financial years 2013 and 2015, as “unrecoverable”.
The saga of bad loans and write-offs goes back at least a decade, during which rumours of the financial vulnerability of banks were kept firmly under wraps and big defaulters protected, even as innocent farmers committed suicide by the thousands across the country. It was only when a ‘king of good times’ repeatedly reneged on salary payments to his staff despite several directions from the court that the balloon of elite defaulters began to deflate, though it still retains buoyancy.
Finance Minister Arun Jaitley must explain why he did not make the health of public sector banks his top priority on coming to office in May 2014, and why he kept the loan defaults a secret.
Instead of exposing the UPA and taking steps to revive the economy, in two successive budgets, he depressed the middle class that keeps the economy moving with its twin capacity to save and consume. The business-industrial class was alienated and investments discouraged by continuing UPA monstrosities like retrospective tax – which continues despite the Prime Minister’s assurance that this was a closed chapter.
The health of each public sector bank should have been disclosed in the financial year ending March 31, 2015. The UPA-appointed RBI Governor kept this a secret throughout his tenure, for which he deserves to be sacked. But the Finance Minister had to know, just as previous Finance Ministers (P Chidambaram and Pranab Mukherjee) would have known; the reasons for their silence must be exposed to public scrutiny.
The truth came to light only when the Centre for Public Interest Litigation (CPIL) approached the apex court for an independent investigation into HUDCO illegally sanctioning loans to willful defaulters, who were let off by the government. As this coincided with an RTI query on bad loans, the Supreme Court wisely expanded the scope of investigation to cover 29 major banks. But these investigations will be futile unless the political or bureaucratic godfathers behind each loan are exposed.
There must be detailed explanations of how loans were extended; if collateral was taken; and why the banks did not seize assets or insist on converting loans into equity in defaulting companies. If there can be an orchestrated hue and cry for sale of assets of losing public sector companies, why are private sector defaulters immune from demands to sell or surrender assets to clear loans? Above all, how many defaulters received loans from other public sector banks?
Seen in this light, RBI Governor Raghuram Rajan’s advice to big defaulters to not lead a “lavish lifestyle” appears as a form of complicity in their loot of public wealth. In nearly three years in office, Rajan has not initiated a single step to clean up the loan advancing mechanism of banks and crackdown on habitual defaulters.
The RBI disclosure that bad debts stood at Rs 15,551 crore for the financial year ending March 2012 and shot up to Rs 52,542 crore by the end of March 2015 is a severe indictment of successive Finance Ministers and bank managements. It appears that the figures for March 2016 will be equally disconcerting. This is mega corruption of the worst kind. Some heads deserve to roll.
ABPLive.in, 17 February 2016
http://www.abplive.in/blog/bad-loans-jaitley-failed-to-prioritise-improving-health-of-psu-banks