Days after PM Narendra Modi described the rise in nonperforming assets of banks as the biggest scam of the UPA government, Finance Minister Arun Jaitley told Rajya Sabha that the “bulk” of these NPAs have arisen out of loans given before April 2014. The Modi government assumed office in May 2014.
Jaitley said these loans were given at times without proper risk assessment and even without being backed by securities. Answering questions on the issue, Jaitley said the NPAs have increased primarily because these were discovered in the RBI’s asset quality review in 2015. He said banks had kept “ever-greening” these loans — while the loans were shown as performing in the books, in reality the assets had become nonperforming. The second reason for the rise, he said, is the interest on these loans over the years.
Former finance minister P Chidambaram asked Jaitley if he has data on how many loans given by banks after April 1, 2014, have become NPAs. “Obviously, the question does not relate to loans given with regard to particular dates. But, it is absolutely clear that bulk of these NPAs have arisen out of loans that were given prior to April 1, 2014.” Jaitely replied. “There has been an aggressive lending practice and, at times, laxity and, at times, lack of risk assessment as far as grant of loans are concerned and that is why, a very large number of these loans became NPAs. And many of them are not backed by adequate securities also.”
To a question by SAD member Naresh Gujral on why a forensic audit of big defaulters cannot be ordered, Jaitley said, “You cannot have a fishing and roving inquiry into a transaction to find out what went wrong. Whenever specific facts have come to notice, as far as the banking industry is concerned, both the regulators, the banks and other investigating agencies, accordingly, have been taking actions against them from time to time.”
SP’s Neeraj Shekhar asked if the government has written off bad loans to the tune of Rs 55,000 crore. Jaitley said neither the government nor banks waive loans of corporates and the liability of the borrowers remained.