Bad loan mess Loan defaulters should be debarred from contesting elections, accepting Padma awards

Image used for representational purpose. Reuters

At a time when the banking industry is fighting against large corporate loan defaulters (promoters who has the ability to pay back but wouldn’t do so), such as Kingfisher Airlines boss, Vijay Mallya, banks employee unions are planning a national campaign demanding action against wily promoters and quick recovery of dues.

The All India Bank Employees’ Association (AIBEA) plans the campaign from 20 April and a morcha before Parliament in mid-September. In an interview with Firstpost, CH Venkatachalam, General Secretary, AIBEA, said both the Reserve Bank of India (RBI) and the government are to be blamed for the current situation. Venkatachalam said loan defaulters should be banned from holding public posts.

“We have been demanding from the Election Commission that loan defaulters should be debarred from contesting elections or becoming ministers, etc. So far, decision is being avoided,” Venkatachalam said.

Excerpts of the interview:

Is there any immediate trigger for your agitation?

The problem of bad loans has always been there. We have been fighting on this issue. But recently the RBI started forcing the banks to provide for all these bad loans without suggesting measures for recovery. So it is just to whitewash the balance sheets. So we felt that we must highlight this problem, as it is the single issue which is killing the banks. So we are reviving our campaign on bad loans.

How bad is the current industry situation?

One point is that the quantum of bad loans is alarmingly increasing. According to government and RBI, it is more than Rs 6 lakh crore. But if you take the restructured loans which are also bad loans but camouflaged as good loans, it is more than Rs 13 lakh crore of bad loans. This is highly unacceptable and may make the banks totally weak. Secondly, instead of taking tough actions to recover the bad loans, the attempt is only to somehow show reduced levels of bad loans by provisions and concessions. What we need is recovery of bad loans. They are trying to reduce the bad loan figures through cosmetic schemes.

Who are to be blamed for the current state of affairs?

In banking business, bad loans are unavoidable because some of the loans can go bad. But today taking loans and making it as bad has become an exquisite art and as a profession. How come, a loan given today becomes bad loan within 3 to 6 months? The problem of bad loan is a by-product of the present neo-liberal economic policies. It is also the result of increasing nexus between political authorities, greedy industrialists, and some corrupt top bankers.

But there have been several steps from the RBI and government to tackle bad loans?

They are repeated schemes and announcements from RBI, but unfortunately these are not going to help in recovery of bad loans. These are all measures to give concessions to the defaulters and remove these bad loans from the books of the banks. Unless stringent measures are taken against the defaulters, the loan cannot be recovered.

What should be done to tackle the bad loan mess?

Not all bad loans are bad. In the NPAs (non-performing assets) or bad loans, there are genuine bad loans too. Some loans have become bad due to genuine problems of the borrower. There are bad loans coming from education loans because jobs are not available. Similarly in the agriculture segment bad loans are there due to the crisis in that sector. But the bulk of bad loans in the system is due to deliberate corporate delinquency (wilful default). They take huge loans but deliberately default. Even RBI has defined it as willful default. Normally loan dues are civil cases. Banks file cases in civil courts on the defaulting company. It goes on for years. Company owner does not bother at all.

What should be the immediate steps against wilful dfualters?

We have been demanding the government to declare wilful default as a criminal offence and take criminal action on the owners and directors of these companies. Their names can be published. Why these are hidden. After all banks are giving loans from people’s money. Why such list should be hidden from them. At least, Parliament can be informed. Also, recovery laws can be given more teeth. More DRTs (debt recovery tribunals) are to be established. Fast track Courts for high volume loan dues can be started.

Is the intention to take action missing?

More than anything, intention to recover is required. Here, the idea is to write off the loans at the cost of public money.

What is your opinion on the Kingfisher case?

Government is to blamed for it (Kingfisher episode). RBI has to be blamed for it. In all the boards, RBI and government nominees are there. Loans are given with their knowledge. They know everything. See, there is no accountability at all. At lower level, for small branch managers, all harassments are there. Why not at the top? If we tighten accountability norms for big loans, things will improve. Government and RBI cannot escape their responsibility.

What is the role played by the political-corporate nexus in the build up of bad loans?

To a large extent, this nexus is the root cause. We have been demanding from the Election Commission that loan defaulters should be debarred from contesting elections or becoming ministers, etc. So far, decision is being avoided. Defaulters should not be allowed to hold public positions. Padmasri Award was given to Ramesh Gelly. He was responsible for the downfall of Global Trust Bank. Why it has not been withdrawn?