Parliamentary panel may propose ‘name & shame’ policy for big loan defaulters
NPAs of state-owned banks had touched Rs 3.61 lakh crore at the end of December 2015. A reply to an RTI application earlier this year revealed that 29 PSBs wrote off `1.14 lakh crore of bad debts between FY13 and FY15.
The Public Accounts Committee headed by Congress leader KV Thomas, which is examining the matter, will meet on July 12 to discuss the detailed reply of Reserve Bank Governor Raghuram Rajan on the issue.
Taking note of the burgeoning non-performing asset (NPAs) of public sector banks, a key Parliamentary panel is set to recommend a proposal to “name and shame” big loan defaulters in its report that is likely to be submitted before Parliament during the Monsoon session later this month.
The Public Accounts Committee headed by Congress leader KV Thomas, which is examining the matter, will meet on July 12 to discuss the detailed reply of Reserve Bank Governor Raghuram Rajan on the issue.
The PAC had taken up the matter suo motu last year. During its meetings, members in the panel strongly pushed for tough measures like putting out the names and photographs of large borrowers defaulting on their payments in a bid to curb the issue of rising NPAs in public sector banks (PSBs).
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Even as, Rajan, in his reply before the panel cited lack of provisions to do so, the naming and shaming idea appears set to be included in the recommendations, a member of the committee told The Indian Express. In a seventy-six page document having question and answer with the RBI Governor (a copy of which is with The Indian Express), the PAC members have also sought reasons for higher NPAs and stressed assets in PSBs in comparison to their private sector peers.
The 16th Public Accounts Committee (term ended on April 30) had suo motu taken up the issue of rising NPA and examined heads of various public sector banks. The reconstituted PAC headed by K V Thomas continued with the issue and has now decided to wind up the deliberations on it and submit the report. When asked whether the PAC will recommend “naming and shaming” measure for big defaulters from public sector banks as demanded by many PAC members, Thomas said: “It can be” but added a report can be submitted by the PAC only if there is no difference of opinion.
“Members have expressed their opinions like that. Now the PAC has to take a decision.” When asked whether the PAC could recommend this, Thomas said: “Let us wait for the report … So far there has been no difference of opinion.” He further added that the committee is trying to send the report to Parliament in this session.
B Mahtab, a member from Biju Janata Dal in the PAC said that there is general consensus in the PAC that big borrowers, who do not pay the loans should be named and shamed. Mahtab said he is confident that this will be part of the PAC’s recommendations, as there is a “larger consensus” in the PAC on this issue.
He said that while banks argue against ‘naming and shaming’ in the name of protecting the interest of consumers and fiduciary clause , the Supreme Court has already made it clear that there should not be any issue in disclosing names of defaulters. He added that ‘name and shame’ could be part of the recommendations. “There is the general consensus. I feel that this will be part of our recommendation,” he said.
While some members maintained that ‘name and shame’ could effectively curb the malpractice, Naresh Agrawal of Samajwadi Party reminded that in case of small farmers doing loan defaults, their names are put on pattas. “If banks start naming and shaming big borrowers/corporates, then the loan recovery environment will improve,” Agrawal said.
In his reply, Rajan said with regard to making public names of loan defaulters, banks follow practices under the overall legal/regulatory framework and that guidelines issued by RBI “do not contemplate” publishing of names of defaulters by the banks.
Rajan also pointed that the issue of publishing names and photographs of defaulters has been examined by various courts and there is “no unanimity” in approach of high courts on the issue. “In view of the legal uncertainty created by the disparate views of various high courts, RBI has also not issued any circulars/directions to the entities regulated by it, on the issue,” he said in the reply.
In March this year, the RBI had submitted a list of big loan defaulters — companies with over Rs 500 crore bad loans in the Supreme Court after the latter demanded such a list acting on a PIL filed by Centre for Public Interest Litigation. At that time, the RBI had told the apex court that it was “extremely necessary” to keep these names confidential due to their “fiduciary relationship”. The NPAs of PSBs had touched Rs 3.61 lakh crore at the end of December 2015. A reply to an RTI application filed by The Indian Express earlier this year revealed that 29 PSBs wrote off an aggregate of Rs 1.14 lakh crore of bad debts between financial years 2013 and 2015.
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