Spurt in bad loans: SC to ask graduates from IIM, law school to prepare report

Apex court would seek assistance of the young graduates to study the matter, reflect upon “what ails the system” and suggest steps to recover the money.

Written by Utkarsh Anand | New Delhi | Published:December 15, 2016 2:46 am
 supreme court, bad loan, loans, IIM, law school, iim bad loan report, public sector bank, bad loan recovery, ts thakur, non performing assets, indian express news, india news, economy, banking The Supreme Court. (File Photo)

A bunch of budding management graduates and lawyers may soon prepare a report on reasons for spurt in bad loans by public sector banks in India and why the recovery has mostly failed.

The report, prepared by the young graduates after visiting the debt recovery tribunals and interviewing judges, would then help the Supreme Court in strengthening the mechanism to retrieve the bad loans, leading to the ever-rising Non-Performing Assets and huge write-offs.

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A bench led by Chief Justice of India T S Thakur Wednesday said the apex court would seek assistance of the young graduates to study the matter, reflect upon “what ails the system” and suggest steps to recover the money.

The bench, also comprising Justices A M Khanwilkar and D Y Chandrachud, said it would be useful to ask IIM-Bengaluru and National Law School, Bengaluru, to handpick students for this task.

“We will ask the IIM and the National Law School in Bengaluru to create a team that would formulate points of reference for us. They would do a comprehensive research and tell us what ails the system…it is clear that the recovery mechanism is not effective,” said the bench.

The court, which had in February taken suo motu cognizance of The Indian Express report that Rs 1.14 lakh crore of bad loans were written off by state-owned banks between 2013 and 2015, reserved its order on forming the team of students.

It also said that the students could be guided by faculty members and bankers. “They can visit the recovery tribunals and the appellate tribunals; interview sitting and retired judges to understand legalities while bankers could help them know better about the technical matters,” it added.

It observed that the students could come out with research papers after studying the bad loans and their recovery mechanism as a project, which would come handy for the bench to address specific issues relating to the recovery mechanism.

“Why has the recovery not been effective and rather damaging? They can focus on this important aspect of the subject,” said the bench, as it sought a response from Solicitor General Ranjit Kumar and advocate Prashant Bhushan, who was appearing for PIL petitioner NGO CPIL.

While Bhushan said a comprehensive research paper on recovery mechanism could be a good idea, the Solicitor General sought some time to check whether any such attempt has already been made.

The bench gave Kumar a couple of days to check with the departments concerned but pointed out that the court has not come across any such exercise.

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