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Journalism of Courage
While the country8217;s middle classes continue to agonise over whether the government will go by Vijay Kelkar8217;s advice and take away the few tax breaks they still have, the passage of the non-performing assets bill in the Lok Sabha can only be sweet music to their ears.
For now, government-owned banks and financial institutions will finally be able to go after fat-cat industrialists who have taken close to Rs 100,000 crore as loans from them in the past, but steadfastly refuse to pay even the interest on them.
To rub salt into wounds, being 8216;sick8217; didn8217;t prevent the industrialists from buying aeroplanes and fancy yachts, or from going off on expensive foreign jaunts all the time.
Apart from the fact that this obscene injustice will finally get corrected thanks to the Securitisation and Reconstruction of Financial Assets bill, interest rates in the country will also fall. Since banks were never sure they would be able to get their money back from the firms they lent to 8212; groups like Parasrampuria Synthetics used the BIFR excuse to dodge lenders like ICICI for several years now 8212; they built a risk premium into the interest rates they charged.
It is this very uncertainty over whether they would get their money back easily from millions of individual clients that, by the way, is the reason why credit card firms charge interest rates over 40 per cent today. So now that banks will be able to use the new law to ensure they get their money back 8212; or they will just take over the assets of the firm and sell them off 8212; they will soon lower their interest rates as well.
Of course, there is still some way to go before the real fat cats are brought into the net. So far, most of the 10,000-odd takeover-notices sent out to defaulters have been to small and medium-sized firms, since banks sent notices only to firms whose assets they felt could easily be sold.
And there was also the fear that the bill 8212; till the Rajya Sabha passes it as well, it remains only an ordinance 8212; would never get past India8217;s political class. But even this is not the end of the road, as the country8217;s politician-bureaucrats will continue to find new ways to help out their defaulting industrialist patrons.
In the last session of Parliament, for instance, MPs like Amar Singh got the finance minister to agree to conduct an audit into the allegations of diversion of funds by a top industrial house 8212; it has been several months already, but for reasons best left unsaid, no material progress has been made on the probe. But let this not stop us from applauding the first major step towards disciplining recalcitrant borrowers. Go get them.
