We’ve broken nexus between banks, large defaulters: Jaitley

Wednesday 06th December 2017 06:27 EST

The ruling NDA has put the Insolvency and Bankruptcy Code to effect, in a bid to clean up the system and rebuild state-run banks. Finance Minister Arun Jaitley responded to steady criticism from the Opposition, blaming the UPA dispensation for the NPA mess of state-owned banks. “Under the new Insolvency and Bankruptcy Code brought by the government, cases have been instituted in the National Company Law Tribunal (NCLT) for time-bound recovery from 12 largest defaulters in six-to-nine months in NPA cases of £17.5 billion. Cases for recovery of NPA dues from assets of these big defaulters are under way at various stages,” he said.

In a blog, the FM said during the period of aggressive lending from 2008 to 2014, gross advances of public sector banks increased by about £340 billion, from £181.6 billion in 2008 to £521.5 billion in 2014. “Despite repayment not being regular on these, through relaxation in loan classification, banks continued to keep defaulters as non-NPA account holders by restructuring them. Between 2008 and 2014, public sector banks disbursed disproportionate sums of loans to several industries. The public needs to ask the rumour mongers at whose behest or under whose pressure were such loans disbursed,” Jaitley wrote.

“They should also be asked that when these debtors delayed in repayment of their loans and interest thereon to public sector banks, what decision was taken by the then government. Rather than take firm decision with regard to such debtors, the then government, through relaxation by banks in loan classification kept these defaulters as non-NPA account holders. These loans were restructured through this, the loss to banks was kept hidden. The banks kept giving loans repeatedly to these debtors and kept ever-greening the loans.”

Jaitley said banks were provided capital so that they became strong and capable of contributing to the nation's development. “The reason for giving capital to banks is that these banks may become mazboot (strong), rather than mazboor (hard-pressed). Public sector banks have been provided capital in the past as well. During 2010-11 to 2013-14 too, government provided banks an amount of £4.40 billion for recapitalisation. Was that also for waiving loans of capitalists?”

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