No loan waiver for defaulters, says Jaitley

 The government has not waived any loans of big NPA defaulters, Finance Minister Arun Jaitley declared on Tuesday.

Between the years 2008 to 2014, public sector banks disbursed disproportionate sums of loans to several industries, he said in a Facebook blog-post titled "The Fiction of Loan Waiver to Capitalists."

"The public needs to ask the rumour mongers at whose behest or under whose pressure were such loans disbursed. 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," he said.

The FM said rather than taking firm decision against debtors the then government relaxed the loan classification norms to keep 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," he said.

The FM maintained that the current government recognised this nexus and took firm decisions with regard to the defaulters.

"Insolvency and Bankruptcy Code was enacted, and by amending it, in respect of companies whose money was not returned to the banks, decision was taken that the debtors concerned would not be allowed to participate in the business of such companies."

The asset quality review (AQR) carried out for clean and fully provisioned balance-sheets in 2015 revealed high NPA.

"Loans of about Rs 4,54,466 crore, which were actually fit to be NPA and were under the carpet, were recognised after intensive scrutiny under AQR," the FM observed.

He held that "cases have been instituted in the National Company Law Tribunal (NCLT) for timebound recovery from 12 largest defaulters under the new Insolvency and Bankruptcy Code".

These 12 defaulters account for non-performing assets totaling Rs 1.75 lakh crore. Cases for the recovery of NPA dues from the assets of these big defaulters were under way at various stages.

Jaitley noted that strong steps taken over the last three years, "not only have the problems received as legacy" been addressed but reforms for rebuilding the strength of public sector banks have been boosted.

"Through capital infusion, banks weakened by NPAs would become strong and become capable of raising adequate capital from the market," Jaitley said.

But, for receiving the capital, banks will have to carry out several reforms so that such situations do not recur, he said.

"While honest businesspersons will be able to access loans from strong and reformed banks, strict and clear law and the all-round clean-up initiated by the government would result in a clean system in the country," Jaitley said.