Govt ready to engage SFIO for recovering bad loans

"There is no problem. If Supreme Court gives a specific instruction, then SFIO can do it... Let's see how things go," Corporate Affairs Secretary R Bandyopadhyay said.

He was responding to a query whether the Ministry would study the SC suggestion of roping in the SFIO for recovering bad loans from companies. The Serious Fraud Investigation Office (SFIO) is under the administrative control of the Corporate Affairs Ministry, and is being readied to become an investigation body at par with the CBI and the Enforcement Directorate.

SFIO has the mandate of taking up investigations that relate to company law violations. On Wednesday, a bench comprising Justice J M Panchal and Justice A K Patnaik suggested involving SFIO for NPA recovery while disposing of a 12-year-old PIL filed by city-based NGO Common Cause.

The PIL wanted the apex Court to direct the government to take stern action to recover bad loans from private sector companies and take steps to prevent the piling up of NPAs.

The present laws were sufficiently stringent to deal with the issue of rising NPAs, the Supreme Court said, adding that their effective implementation is the government's area and the court would not interfere with it. "Whether such laws are implemented efficiently and effectively is for the legislature and the Centre to decide and courts cannot interfere with it," the bench said.

It also observed that a committee, headed by a Deputy Governor of the RBI, was already looking into the issue and it will lay out certain plans. According to the government, gross NPAs of the commercial banks amounted to Rs 81,813 crore at on March 31, 2010.

To tackle NPAs, the government has enacted laws such as the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, (DRT Act) and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

NPAs are assets classified by banks or financial institutions as sub-standard, doubtful or loss asset, in accordance with the directions or guidelines from the RBI.
Earlier, in the NPA case, the apex court had directed the government to take into consideration the suggestions made by Common Cause. One of the suggestions was that the government should make a provision for mandatory filing of affidavits by directors of the companies seeking loans, saying whether they had been directors in a defaulting company earlier.

These affidavits should also contain details of the personal assets of the directors concerned, the NGO suggested. However, the government had informed the apex court that the companies have "completely ruled this out".