ABill to change the system of debt recovery was passed in The Lok Sabha on Monday, with Finance Minister P Chidambaram assuring the House that the problem of mounting non-performing assets (NPAs) of banks was not insurmountable and certainly not alarming. However, several members questioned the rationale for the hurry shown by Chidambaram in having the law passed — to the extent that the legislation bypassed the Standing Committee on Finance. The Bharatiya Janata Party (BJP) legislators, led by former finance minister Yashwant Sinha, walked out in protest.
The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011, seeks to convert any part of debt of a defaulting company into shares by the asset reconstruction company.
Defending the government, Chidambaram said when the Bill was introduced last year the speaker had decided against referring it to the Parliamentary committee. Sending it to the panel now would delay the process further, he said.
Trinamool Congress’ Saugata Roy said he had no serious differences with the government on the Bill. But Pinaki Mishra of the Biju Janata Dal raised the issue of inefficiency of the public sector banks. “NPAs of all nationalised banks in India stand at a staggering figure of Rs 1.23 lakh crore,” he said. Criticising the legislations for their “inefficacy”, Mishra said: “There are 67,524 cases pending before debt recovery tribunals.” There is just no accountability in the public sector banking institutions, he added. Mishra argued asset reconstruction companies should be able to pass on debt to one another. “The purpose of Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) was to ensure the expeditious recovery of debts. Therefore, if Section 5 of Sarfaesi could be suitably amended and there could be an inter se re-assignment of debt, this could be much more expeditious and efficacious way of settling these issues.”
He also pointed out that the Stamp Act was inconsistent across states. “The Stamp Act must be uniform in all states that have the Sarfaesi Act,” he said.
Gurudas Dasgupta of the Communist Party of India raised the issue of Kingfisher Airlines and lauded State Bank of India for refusing to lend any more to the ailing airline. In his reply, Chidambaram said no leniency would be shown to anyone.
Conceding that NPAs had indeed been going up — it was now approximately 3.5 per cent of total loans — the finance minister said this was a result of the country’s economic performance. “Because RBI is very strict in requiring the banks to make provisions, the net NPA is only 1.62 per cent (of advances). Units which are genuinely stressed must be helped.”
He was clear that no special favours would be shown. “A particular case was mentioned, where there was a huge NPA; the strictest action is being taken by the banks, in asking them to put up the money upfront before any kind of accommodation can be given; no fresh loans are being given. In fact, the Tax Department has taken severe action in attaching those assets. So, no favours are being shown to any one, irrespective of whoever he may be. The law is taking its course.”
