'RBI does't act, need to criminalise wilful default'

The Reserve Bank of India (RBI) only notes cases of loan default but does not take any action and the only reform needed in India is action against wilful loan defaulters, said a top leader of a major bank employees union.

"The fact is that RBI does only hissing but will not bite... This is the politics behind bad loans. The RBI acknowledges that there are 7,035 wilful defaulters involving about Rs.58,800 crore. Why can't criminal action be taken against these defaulters?" C.H.Venkatachalam, general secretary of the All India Bank Employees Association (AIBEA) told IANS in an interview.

Reacting to government owned banks reporting steep fall in profits or net losses, ballooning of provisions against bad loans and write-offs of bad loans, he said the RBI has been in the know of the bad loans as it has its representatives in every bank board. There is also a RBI audit, he noted.

"The only banking reform that is required is a very strong law to take stringent action of loan defaulters. Writing-off bad loans is one thing but what about accountability?" asked Venkatachalam.

Asked as to how unions can absolve themselves of the blame as there are two employee directors in every bank, he said: "No doubt union leaders are functioning as directors on the boards. But they have a limited role. They act as watchdog in many cases.

"They protest, object, disapprove and dissent whenever any wrong decisions are taken. But the functioning of the board permits nothing more than this. They are personally bound by secrecy oaths and so have their limitations."

Noting there have been workman directors in the banks since 1971, he said that in the last more than four decades of experience, there is not a single case where these directors are found to be involved in any wrong doings.

"Top bank managements find us as a hindrance and resent us as we are effective. In some cases, our union nominee directors are targeted for victimisation and harassment because they took strong positions on some of the wrong decisions of the management in the board meetings," he said.

In 22 public sector banks (PSB) out of 25, AIBEA has its representatives as nominee directors.

Venkatachalam said during the last two decades creating bad loans have become an exquisite art.

"These bad loans are daylight robbery and loot of national wealth. Provisioning, write off, one time settlement, interest waivers, restructuring, asset reconstruction and others are the tools by which the bad loans are hidden from public glare," he contended.

While the banks have collaterals for most of the loans, but they are hardly enforceable.

"In many cases, the personal guarantee of the top man of the company is waived," he said.