Arun Jaitley to banks: Help private sector revive investments

Arun Jaitley also spoke of liberalisation of FDI policies because of which India has emerged as a preferred destination of foreign investment.

By: ENS Economic Bureau | Gurgaon | Published:November 6, 2016 1:11 am
arun jaitley, jaitley, jaitley private sector, jaitley banks, jaitley on banks, indian banks, india banks, arun jaitley on investment, finance minister jaitley, india news, indian express news Arun Jaitley said there is a “silver lining” visible with festive purchases. (Source: PTI Photo/File)

As bank credit to the industrial sector slipped into the negative zone in August for the first time in atleast a decade, finance minister Arun Jaitley on Saturday urged the lenders to support corporates to help spur private investment, which he said was a must for the economy to take off in a big way. Speaking at a seminar on debt recovery, Jaitley said, “Indian private sector needs to expand in a big way. It needs to invest and that’s when all engines of the economy start firing……To support that, you need banks to ensure flow of credit and support the private sector in order to expand their (private sector) investments. Therefore, the role of the banks in supporting growth, particularly as far as the domestic private sector is concerned, is extremely significant.”

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The RBI data shows that for the month of August 2016, the loan outstanding of scheduled commercial banks to the industrial sector contracted by 0.2 per cent. While it stood at Rs 26,23,800 crore in August 2015, it fell 0.2 per cent to Rs 26,18,100 crore. He however, seemed satisfied with the robust foreign capital flows and increasing public investment. Pointing that the bank credit, which has slowed over the last few years due to rising bad loans and a slow recovery process, needs to pick up, he also pitched for expeditious adjudication of debt recovery cases. He said that the doctrine of natural justice of giving opportunity to defaulters to defend themselves need not be carried to an “unnatural extent”.

“It is not a usual judicial or quasi-judicial procedure when endless opportunities have to be granted to people to defend cases because if natural justice is carried on to unnatural extents, litigation will become unending. Therefore, efficiency has to be introduced into the recovery procedure as far as the defaulting parties are concerned,” he said. Close to 95,000 cases involving more than Rs 5 lakh crore are pending before debt recovery tribunals across the country.

“So, every case that the litigant manages to delay hurts the larger investment environment of the country because if money of banks are blocked with some defaulters, it prevents the bank from funding others who otherwise could have utilised this investment for fruitful purposes and benefit of the country,” he added. The minister also spoke of liberalisation of FDI policies because of which India has emerged as a preferred destination of foreign investment. “Foreign investors are getting far greater returns on their investment here than in any other country,” Jaitley asserted.

The minister further said there is a “silver lining” visible with festive purchases, indicating upturn in rural and urban demand, but domestic investment will have to pick up in a big way for which banks need to do their bit by supporting corporates that will boost growth. On the debt recovery process, the finance minister said the approach of the government has to make it more efficient and effective by making legislative changes and empowering banks.

“Besides making changes in the insolvency law, the government has made changes in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) law and debt laws. And we have cut short procedures in order to add efficiency to the whole system,” Jaitley added. RBI has been pro-active in this, Jaitley said, adding that it has come out with policies providing more flexibility to restructure debt. Changes made in the recovery law set time limit for disposal of recovery cases and seek to improve ease of doing business by ensuring speedier resolution of defaulted loans.

The highlights of the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, are expansion of definition of security interest, inclusion of debenture trustees and strengthening of asset reconstruction companies (ARCs). Besides, secure creditors like banks and financial institutions (FIs), ARCs and debenture trustees will get priority over any other dues, including taxation ones of central and state governments or any local bodies, sources said.

With PTI inputs.