Bad loans


The disclosure made by the NDA-government that Rs 2.40 lakh crore having been written off as bad debts of many corporate houses during the past four years is a serious issue which attracts serious attention. This is public money and the money from the state exchequer in which contributions have been made by the people as tax and no government has the authority to write it off in favour of few corporate entities. Described as bad debts by the government and the Public Sector Banks (PSBs) has suddenly become generous in doling out concessions to corporate houses, which helped the BJP led coalition to ride on the wave of elections to come to power four years back. Time and again questions have been raised why the governments become generous in playing with the public money for which the common masses are made to pay through their nose of their hard-earned money. Moreover, the PSBs also hold the public money that is advanced as loan to some corporate houses for building businesses and then they turn red and seek concessions from the banks. The corporate houses which have been flourishing on ‘crony capitalism’ and gobbling up the money from the state exchequer should not be extended these concessions without the consent of the public. It is unfortunate that these disclosures are coming at a time when most of the corporate houses that have gone into hiding outside India have availed off loans running into hundreds of crores and the NDA-government is not concerned about them. In fact, the latest information available in the public domain points out the laxity on the part of the government which allowed these entities run away from the country after misappropriating public money from the banks. The present government is engaged in fire-fighting on these serious issues and busy in blaming the previous governments for the loot from the PSBs instead of initiating remedial measures for checking flight of the capital from the country to safe havens abroad. It also becomes known that there is bigger malaise that afflicts the banking system and the political interference that allows such crony capitalists to choose whenever they want to run away from the country and seek refuge elsewhere in the world. The issues of money-laundering have also been eclipsed by such developments and the government maintains a criminal silence and rakes up other controversies to divert the attention of the common masses from the serious issues. On top of what is happening in the country concerning the corporate houses, the NDA-government has decided to infuse Rs 2.11 lakh crore of fresh capital into PSBs in the next two years, through a blend of financial mechanisms, in order to revive the growth momentum only for a short span of time. This step can help in reviving the growth when the economic slowdown has set in after the two major steps initiated by the central government on demonetisation and implementation of Goods and Services Tax (GST) regime across India. The implementation of the GST regime has further added to the slowdown in the country’s beleaguered economy dealing a severe blow to the small and medium business houses. It was only late last year that a new bankruptcy law was introduced, and over the course of this year the Reserve Bank of India (RBI) has asked banks to invoke insolvency proceedings in the case of 50-odd accounts if settlements remain elusive. The Public Sector Banks, under pressure from the RBI to acknowledge the stress on their books, face the prospect of taking heavy haircuts to write off some of these loans at whatever residual value remains in the businesses. When combined with their need to scale up their capital base to comply with Basel III norms, PSBs have naturally been in damage control exercise rather than chasing growth like their competitors in the private sector. In fact, the private banks have kept their financial position better off than the PSBs because they did not come under pressure from the government for committing advances to such companies. The lending practices have to be corrected in an independent manner so that bad debts of big borrowers do not affect the overall working of the PSBs.