The government is finding it difficult to identify willing members for its recently announced high-level panel to suggest recovery and sale of non-performing assets (NPA) of public sector banks.
No, thanks
According to bankers privy to the discussion with the government, the Finance Ministry had sounded out former Securities and Exchange Board of India (SEBI) Chairman M. Damodaran, former Judge of Supreme Court, Justice B.N. Srikrishna, and a former central vigilance commissioner, P. Shankar, to be a part of the committee.
“However, they conveyed their limited availability for interaction with us,” said a chief executive of a public sector bank, who wished to remain anonymous. As a result, the government will now try to look at other options.
The formation of the panel was aimed at advising banks on bad loan recovery and one-time settlement offers from defaulters. Banks often show reluctance in one time settlement offers from defaulters as they have to take haircut if such offers are accepted. They fear questions will raised by the investigative agencies if they settle for less.
A recent case in point is the recovery of dues from grounded carrier Kingfisher Airlines and its owner Vijay Mallya. While banks owe over Rs.9,000 crore to the defunct airline, Mr. Mallya had offered Rs 4,000 crore as one-time settlement.
Banks had rejected Mr. Mallya’s settlement offer as they fear adverse public opinion if the entire money is not recovered. Moreover, public sector banks come under the purview of the investigative agencies, and bankers fear these agencies could hound them if they settle for what was offered by the liquor baron.
For transparency
“As a result, if there is a government appointed body, which vets the one-time settlement schemes, and suggests a go-ahead, then the system will look more transparent,” said another senior banker.
Anil Sinha, director of the Central Bureau of Investigation, recently came down heavily on banks for not reporting frauds to the investigators, indicating that lenders had given wilful defaulters and fraudsters a long rope to escape law. Mr. Sinha cited the example of Kingfisher Airlines to point out that banks have been reluctant to file a complaint. “CBI has recently registered a case of cheating and fraud against Kingfisher and its erstwhile management involving allegations of defaulting banks to the tune of nearly Rs. 7,000 crore. This case was registered in July 2015, but the loans were taken during 2004-2012,” he had said.
The finance ministry has been advising banks to beef up their recovery efforts in the wake of sharp rise in non-performing assets.
The stressed assets for the banking system as a whole, which stood at 9.8 per cent at the end of March 2012, moved up sharply to 14.5 per cent at the end of December 2015. Public sector banks were worst affected, as their stressed asset ratio, during the same period, spiked from 11.0 per cent to 17.7 per cent.
The example of Kingfisher Airlines was cited to point out that banks are reluctant to file complaints
