What was RBI doing: SC poser

Bad loans: Apex Court for naming and shaming of defaulters

New Delhi : It can be safely described as the Vijay Mallya effect. The Supreme Court has lobbed a question at the Reserve Bank of India that has been troubling ordinary Indians for some time. “What is this happening? There are people who take thousands of crores in loans and they manage to run away. Banks are left to waive the loans or restructure them. On the other hand, farmers getting some thousands in loans are compelled to even sell their lands if they cannot repay,” said a bench led by chief justice T S Thakur.

“Are you not supposed to keep vigil? Is RBI not supposed to maintain information and act on how public sector banks are advancing loans? These banks are supposed to act prudentially but if they have been doing it by flouting norms and without ensuring adequate assets as securities, are you not supposed to take actions against them? RBI is the regulator… you must act as a watchdog,” the bench told RBI counsel Jaideep Gupta.

The snub could not have been more direct and it came as the RBI pressed for keeping the names of the biggest defaulters secret and also insisted that it could not disclose the aggregate default amount.  The RBI’s counsel said: “Disclosing aggregate figure can have an impact on the economy. Also, a lot of decentralisation has taken place and the banks have been given discretion to give loans.

The RBI does not look into their day-to-day restructuring of loans or NPAs.” All these assertions by the RBI came even as the apex court agreed that the names could remain under wraps for now, but the amount involved could be disclosed. After perusing the details of defaulters of loans of Rs 500 crore and more, submitted by the RBI in a sealed cover envelope to maintain “confidentiality”, the court has observed that “the information does make out a case for us to examine the matter” and also issued notices to the Union Finance Ministry and the Indian Banks’ Association making them parties to the case.

“We have enlarged the scope of this matter and we will decide it. It is quite a substantial amount which is involved. We need to be satisfied what requires to be done,” it observed.

In so far as the confidentiality clause is concerned, the bench observed: “The concern here is that lakhs of crores in outstanding has been in default of repayments and we had asked for figures of only those who had outstanding of Rs 500 crore and more. This amount will certainly be more if we have all the figures. We will formulate the issues and debate it so that we can settle it. The issue of whether a confidentiality clause will apply or not can also be looked into by us.”

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