The Lok Sabha on Thursday passed the Banking Regulation (Amendment) Bill, 2017, after Finance Minister Arun Jaitley declared that criminal and recovery proceedings will be started against defaulters of bank loans who divert money and asserted that no one can claim equality in not repaying loans to the banks.
Replying to a debate on the bill, Jaitley said that a company defaulting on loans cannot claim the right of equality in treatment as regards to repaying the loans. He said a defaulting company cannot ask why it was being targeted when some other defaulters were being let free.
"No, that cannot be an argument. The system has the capacity to take only a certain number of cases. I'm sure they will take up more case," he said, referring to the 12 non-performing assets (NPAs) that have been identified for action by the National Company Law Tribunal (NCLT).
He said the government would go after those who diverted funds got through loans and defaulted on payments.
Many NPA cases could be fraud, as money taken was diverted. These are not routine NPAs. Criminal proceedings will be carried out and bank will start recovery procedure for such accounts.
After the Minister's reply, the house passed the Bill, by rejecting a statutory resolution disapproving the Ordinance moved by a Congress member.
Under the bill, the central government may authorise the Reserve Bank of India to issue directions to any banking company to initiate insolvency in respect of a default under the provision of the Insolvency and Bankruptcy Code.
It also has provisions empowering the Reserve Bank of India to issue directions to banks for resolution of stressed assets.
"Many NPA cases could be fraud, as money taken was diverted. These are not routine NPAs. Criminal proceedings will be carried out and bank will start recovery procedure for such accounts," Jaitley said.
The Minister said that the loans, which have turned NPAs, were probably given at a time when the economy was in a "boom" period and they seemed good investment proposals.
Nobody anticipated global crisis at that time... in last 3-4 years, prices of commodities collapsed. We’re now trying find a solution for this difficult situation... Our laws are obsolete and impeding the recovery process... therefore this mechanism was set up. It will select defaulters, direct banks to move expeditiously against the defaulter. NCLT will dispose of the case within 180 days. This process will recover the public money, so no one should have objection.
Tracing the background of the NPAs problem of public sector banks (PSBs), Jaitley said that while private sector concentrates on retail lending for car and home loans, PSBs have been much ahead in industry and infrastructure lending for the overall growth of the economy and contribute to spending on social programmes.
Referring to NPAs which amounted to more than 13 percent of advances in 2001, the figure came down to less than 3 per cent in 2007-08, Jaitley said.
The sectors most responsible for the accumulated NPAs are steel, power, textiles and infrastructure, he added.
(This article has been edited for length)
(We all love to express ourselves, but how often do we do it in our mother tongue?Here's your chance! This Independence Day, khul ke bol with BOL – Love your Bhasha. Sing, write, perform, spew poetry – whatever you like – in your mother tongue. Send us your BOL at bol@thequint.com or WhatsApp it to 9910181818.)
(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)