The non-performing assets (NPAs) of banks have assumed a ‘scandalous’ proportion. It is painful see the banks’ inability in recovering money from the defaulters. Even if the banks dispose of the properties of defaulters, the maximum amount which can be realised comes to les than 40 per cent of the total amount loaned to them. A glaring case in point is the fugitive Vijay Mallya, who owes hundreds of crores to the banks, which the lenders cannot just realise by selling his villas,
which have few or no takers. The growing NPAs is a brazen epitome of India’s worsening public sector banking, erosion in professionalism at top level and scandalous nexus between lenders and borrowers at the top level. The growing menace of willing defaulters is another area of concern. All this makes the going tougher for bankers and hence the need to fix the responsibility and take action against the guilty bankers. In many cases, there can be genuine reasons where the borrowers are not in a position to return the money. In several cases, they wait for the government concessions, which they get quite often. The Central government writes off debt of corporate players to help them carry on their business pursuits, but that should the rarest among the rare and not a routine exercise.
Today’s NPAs figure of Rs 8 lakh crore has accumulated over the years. The previous UPA regime was not able to take a strong stand on the issue. It was too late when then Reserve Bank of India (RBI) Governor Raghuram Rajan spoke about ‘surgery’ to treat the problem of NPAs. However, the RBI under the current regime is gearing up for a surgical strike against NPAs, which involves several big industrial houses of the country. How the tax payers’ money can be abused is amply reflected in the way the successive Central government and India’s leading bankers, mostly from the public sector, allowed the NPAs to swell, which is devouring the vitals of Indian banks like anything.
Smaller borrowers are harassed like anything if they default once or twice while returning money to the banks. They are penalized, but big fishes are rarely touched. Needless to say, top hundred business houses are said to be accounting for a major chunk of the banks’ total NPAs today.
It is, therefore, heartening to know that the RBI, emboldened by the Banking Regulation (Amendment) Ordinance, will push for the resolution bad loans worth around Rs 8 lakh crore by March 2019. “It should be safe to assume that the non-performing assets (NPAs) mess would
largely be resolved by the first quarter of financial year 2019-20,” says an Assocham study titled ‘NPAs Resolution: Light at the end of the end of tunnel by March 2019.’ “This will be helped by a combination of several factors turn around in the economic cycle and some resolute steps by the Centre and the RBI to fix the issue,” says the report. It is no secret that NPAs are a big drain on the financial health of banks especially public sector banks (PSBs). For example, 27 PSBs collectively made an operating profit of Rs 1.5 lakh crore in 2016-17, but after allowing for the provisioning for bad loans, among others, net operating profit slipped to a paltry Rs 574 crore.
“If balance sheet numbers are anything to go by, it simply brings home the fact that banks have no capacity to do fresh corporate lending that is necessary for pushing subdued private sector investment,” says the study. Banks, however, must not resolve NPAs through settlement schemes or sell bad loans with hair cut to asset reconstruction companies. The banks must not also get any cushion against the CBI, the CAG and the CVC. To begin with, the RBI has initiated the process
of resolution and identified 12 accounts each having more than Rs 5,000 crore of outstanding loans and which accounting for 25 per cent or nearly Rs 2 lakh crore of total NPAs of banks for immediate referral for reaching a conclusion under the IBC. The RBI must deal with NPAs firmly.
(The writer is an independent commentator on politico-economic and social issues. Views are his personal)