Amid outrage over Vijay Mallya’s massive default on loans, Finance Minister Arun Jaitley and RBI Governor Raghuram Rajan cautioned against overstating the bad loans crisis in the banking system lest it hampers the entire lending operations and growth.
Reacting on the Vijay Mallya’s massive default on loans, Jaitley said individual misdemeanours will be “looked into differently”.
Arun Jaitley attended the Reserve Bank’s Board Meeting and discussed the need to clean up the bank’s balance sheets.
“We don’t want to create a situation where we overstate the crisis and in the process, the whole activity of lending for growth itself starts suffering because people become extraordinarily defensive. We don’t want to reach that situation,” Jaitley said.
RBI governor Rajan said “we have to be careful as we go forward” that one hand criminal actions are penalised.
“But at the same time we don’t indulge in a broad fishing expedition which then becomes a reason for banks to get worried about making loans which then hamper the recovery as well as hamper the absolutely important investment in infrastructure.
“We have to draw that balance very carefully and we are hopeful that we can manage that,” he said.
“As the revival of those sectors takes place, you will certainly find cleaning up of balance sheets, which also takes place because over the next few quarters they would probably have a possibility of reviving,” Jaitley said.
RBI governor, Rajan said there is a well-defined process for defining wilful defaulters.
“Broadly speaking, it may be manoeuvres, which strictly speaking are not illegal, but which divert funds away from the project and elsewhere. Now some of these actions may also be illegal.
“We have a process by which people are declared wilful defaulters, we maintain a registry of wilful defaulters and we have strengthened the penalties, if you are a wilful defaulter on your ability to raise money from the system. So I think that process is there,” the Governor said.
The provisioning for NPAs done by PSBs as on December 2015 stand at Rs 1,35,938 crore.
State-owned banks wrote off over Rs 1.14 lakh crore debt during the last three financial years that was more than the amount written off in the previous nine fiscals
The gross Non Performing Assets (NPAs) of the public sector banks (PSBs) increased from 5.43 per cent as on March 2015 to 7.30 per cent as on December 2015.
Gross NPAs of PSBs increased from Rs 2,67,065 lakh crore in March to Rs 3,61,731 lakh crore in December.
( With PTI inputs)