Bhushan, Yadav want White Paper on PSB loans

Demand setting up of SIT to probe irregularities

Leaders of civil society group Swaraj Abhiyan, Prashant Bhushan and Yogendra Yadav, on Thursday demanded a comprehensive White Paper giving full details of the stressed assets, non-performing assets (NPAs) and restructured accounts of all public sector banks (PSBs).

The duo alleged that public money was being disbursed as loan to bribe-givers and promoters with dubious track records and for non-viable projects. Citing examples of companies openly bribing and using other inducements to influence people in power, they said lakhs of crore of rupees of "unsuspecting public" are at huge risk due to the lax attitude of PSBs in sanction and recovery of loans.

"Equally disconcerting is the dwindling quality of asset management: Impaired assets have risen from 6.8 per cent in 2009 to 12.1 per cent in 2013. Urgent and radical measures are needed to arrest this slide and infuse transparency and accountability in working of PSBs to ensure stability in the financial system," they said in a note.

According to the note, total loans given by banks as of March 31, 2015, were approximately Rs 70 lakh crore and loans worth nearly Rs 7.7 lakh crore, ie, a staggering 11 per cent of advances, were believed to be classified as "stressed assets", ie, assets whose repayment and/or servicing of interest was in serious doubt. Estimated NPAs of PSBs on the said date were approximately Rs 2.67 lakh crore. Wilful defaulters constituted 22 per cent of Gross NPAs of PSBs, which were estimated at Rs 59,000 crore. Banks sold bad loans worth Rs 1.89 lakh crore to asset reconstruction companies (ARCs) for Rs 62,551 crore and incurred losses of Rs 1,26,449 crore till March 2015, the note said, quoting media articles.

"Yet senior management like executive directors, managing directors and chairman of PSBs are not held accountable," the note added.

"Banks are soft on disbursing loans to corporates and their recovery. However, they adopt stringent measures in disbursing educational and agricultural loans and also for their recovery," Bhushan said at a press conference releasing the note. The senior Supreme Court advocate also demanded that a special investigation team (SIT) to investigate all cases of stressed assets/NPAs to fix accountabilities, make public the findings of the investigation and the action taken or proposed to be taken to retrieve the money within a stipulated time frame.

Other demands included passing of a law to bring to book all the wilful defaulters. Such a law should include provisions for recovery of dues to PSBs and lending institutions from the personal assets of the promoters, they said.

Techno-commercial evaluation should be made mandatory for all proposals exceeding Rs 100 crore to be done by an "independent body" to be set up by the government. This would also help to avoid "bank-shopping" by borrowers who approach other banks even after their proposals are found to be unviable and rejected by some other PSBs approached earlier.

The Abhiyan also envisaged this independent body to do reappraisal of project status and state of affairs of the company, whenever there was a loan restructuring request. "If the restructuring of loan is recommended, then such appraisal report shall be on the website of that independent body, the bank(s) and the company concerned along with the appraisal report for the initial sanction of the loans with detailed justification for restructuring…," the organisation has demanded.