he Indian Banking sector continues to take major hits in terms of bad debts, or defaults in repayment vis-a-vis huge loans. The government is unable to do anything towards setting things right. The latest expose is, again, from Punjab National Bank — the fourth largest public sector bank, which was already steeped in multiple scams in the recent past. It has reported to the stock exchange that an alleged “fraud” of nearly Rs 4,000crore had been indulged in by Bhushan Power and Steel.
Notably, this expose came within days of the presentation of the Economic Survey Report 2019 in Parliament, which claimed that the performance of the banking sector, mainly public sector banks, improved in the past fiscal. The claim was nothing great to crow about, considering the huge size of the problem at hand. The report presented in Parliament by Finance Minister Nirmala Sitharaman said the gross NPAs of scheduled commercial banks decreased from 11.5 per cent to 10.1 per cent between March 2018 and December 2018. However, the PNB admission makes the government’s claim sound false. The timing of the expose also seems like it was consciously delayed and brought to public knowledge after the Budget speech was delivered.
Notable in this context is an answer given in Parliament a week ago, which said the first term of the Modi government – from 2014 to 2019—saw a writing off of “bad debt” cases totalling over Rs 6 lakh crore. Obviously, the common man gained or benefited little from this, and it’s safe to assume that big business sharks took the most benefit out of these unacceptable book transactions. Non-Performing Assets (NPAs) or bad debts stood at around Rs 10 lakh crore in public sector banks in recent times. This was of a little over Rs 3 lakh crore in 2015, to which was added new NPAs and interests to reach the situation to such a pass. The government ought to explain why things have reached such a desperate situation. What all transpired after 2015 cannot be hived off on the ‘corrupt Congress’ of 70 years.
Recovery in relation to bad debts by wilful defaulters – those who have the capacity to repay but would not – is very slow. This could be seen as a failure on the part of the various mechanisms run by the government, like the National Company Law Tribunal (NCLT). Several cases of bad debts and of wilful defaulters are pending before it for long. The inefficiency demonstrated by such bodies in disposing of cases may not be only due to ineptness. It is possible that the massive defaulters are also interested in inordinate delays. The errant businessmen are using the legal mechanisms to outwit the banks. Those like Vijay Mallya are fighting their battles from foreign soil while years of ‘efforts’ on the part of the government to rein them in have not succeeded. On the other hand, when people like Mallya show willingness to pay back the amounts allegedly usurped by them, the government seems unwilling to accept their offer without showing any reason for blocking repayments. In the process, while political mileage may be obtained, the country loses out on regaining misappropriated funds.
It is understandable that all bad debts are not caused out of fraudulent activities. Failure in business attempts lead to such situations too. At the same time, the government as also banks cannot take matters of default easy. It is imperative to find out what went wrong in each of these cases.
Some efforts are under way to recover bad debt. CBI conducted simultaneous searches at over 100 spots across 19 states this week as part of the probes relating to banking frauds and corruption in other fields. It had searched premises of 13 companies and bank officials some time ago in relation to banking frauds of over Rs 1,000crore. Similar actions come off and on, but obviously the big sharks are smarter in escaping the supposed dragnets. The result is that the cases go on forever and the country is the loser. Thus the feeling that the government is also insincere and is giving time to several big business houses to play around with the system may not be totally mistaken.
Banks recovered some Rs55,000 crore through the NCLT mode. The claim from the government is that the bad debt of public sector banks came down to over Rs 8 lakh crore, but this still is a huge burden on the banking sector.
The new expose about the alleged PNB-Bhushan Power and Steel manipulations of funds show more such cases are bound to come up in due course, further denting the financial health of PSU banks and ultimately damaging the citizen. Now it has been proven that those administering the banks – the top officials in particular – have thrown well-established rules relating to loans to the wind. It was also likely that those in the finance ministry exerted pressure on banks to issue loans to some business houses without sufficient guarantees.
In matters of recovery, the government did much less than what it should have.