FM promises action against loan defaulters

FM promises action against loan defaulters
PRESS TRUST OF INDIA

NEW DELHI, JULY 8: Finance Minister Yashwant Sinha today said government will move `definitively and mercilessly' against wilful defaulters of bank loans which may result in imprisonment and attachment of property after October 1.

``No case of wilful default (of bank loans) will escape the notice and I will hold bank chairmen personally responsible for any delay in filing a suit,'' Sinha said expressing government's commitment to recover the whopping Rs 52,000 crore non-performing assets of public sector banks.

Asserting that it has now become increasingly difficult to default on bank loans, Sinha told state-run Doordarshan TV channel that he had fixed a deadline for public sector banks to take action on bad debts. ``We will sit and review the situation after the deadline (of October 1).''

``We are going to make things difficult (for wilful defaulters). New provisions have been made in the debt recovery tribunal. We will move definitively and mercilessly in this regard,'' Sinha said.

He said government would also set up an agency for exchange of information which would help in preventing a bank loan defaulter seeking fresh loans from other banks. The Reserve Bank would soon formulate a `non-discriminatory and non discretionary' arrangement for recovery of bad debts, he added. The Finance Minister was responding to a query on whether bank managers would be given freedom to settle bad debts in those cases where total recovery of loans including interest dues were not possible.

A Rs 100 bad debt might have become Rs 500 today and still recoverable but when it becomes Rs 1,000 tomorrow, it might become impossible to recover, Sinha said, adding in such cases, bank officers would be held responsible for not acting on it in time.

Referring to weak banks, Sinha said government would soon set up financial reconstruction authority to ensure banks got necessary helpline in this regard.This will be a superior authority which would even deal with asset reconstruction, he said adding as a first step to tone up the working of public sector banks, government was in the process of selecting the right bank chairmen for the job.

Sinha said expenditure reforms commission (ERC), set up to downsize government and cut non-Plan expenditure, will soon sumbit its report.The ERC headed by former finance secretary K P Geethakrishnan, will basically go into the entire gamut of cutting government expenditure and submit its reports in phases during the year, Sinha said.

Sinha, however, did not elaborate on the commission's report but indications are that the first report would deal with downsizing some of the ministries including information and broadcasting in which strength of lower level staff is to be cut up to 70 per cent.

Asserting that burgeoning fiscal deficit is the `biggest worry' of the government, Sinha said expenditure reforms, zero-based budgeting and bringing in a fiscal responsibility act are the three thrust areas of his ministry.

ERC in its first report is expected to suggest radical steps like closing down of Films Division, Children's Film Society, National Films Archives, Directorate of Film Festivals, Directorate of Advertising and Visual Publicity and a few other divisions.

On the government decision to allow lowering of government equity to up to 33 per cent in public sector banks, Sinha said this decision has been taken to facilitate restructuring some of the PSU banks by infusing fresh capital.

Asked how government would be able to retain the public sector character on divesting majority share in PSU banks, Sinha said government would through legislation retain the powers to appoint chairmen, executive directors and some of the members of the board.

The authority of Central Vigilance Commission over PSU banks and powers to appoint board members by government constitute public sector character and this power would be retained by the government, he said. Leadership ability was an important factor for restructuring the banks particularly the weak banks, Sinha said, adding the government has in the meantime tried to select best possible persons as chairmen and managing directors of some of the banks. ``I am confident these measures will help in nursing the banks back to health,'' Sinha added.