'Suit-boot-jhoot sarkar' helping fraudsters: Congress slams RBI's rule tweaks on defaulters

'Banking frauds have risen 17-fold under the Modi government...between 2015-2023,' Congress leader Jairam Ramesh said.

Finding fault with the tweaking of rules to allow banks to go for compromise settlement of fraud accounts and wilful defaults, the Congress on Wednesday asked the RBI to clarify whether it acted under pressure from the Modi government to help “fraudsters” while farmers and small businessmen are not given such facilities.

Congress General Secretary Jairam Ramesh said the RBI must immediately repeal its instructions and prevent banks from settling with wilful defaulters and fraudsters and clarify why it thought these instructions were “necessary at this time” despite “repeated warnings and instructions to the contrary”.

Ramesh’s statement came days after the RBI notified the 'Framework for Compromise Settlements and Technical Write-offs', which the bank employees' union said was in variance with the central bank’s June 2019 instructions that were against allowing borrowers who have committed frauds/malfeasance/wilful default to restructure their loans.

“Honest borrowers – farmers, small and medium enterprises and middle-class salaried workers – are groaning under relentless EMIs. They are never given a chance to renegotiate their loans. Yet the Modi government has now provided fraudsters and wilful defaulters such as Nirav Modi, Mehul Choksi and Vijay Mallya a path to rehabilitation,” he said.

“While wealthy financiers of the BJP are given every undeserved convenience, honest Indians struggle to pay their loans. This reveals the true nature of this ‘suit-boot-jhoot’ sarkar,” Ramesh said.

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He alleged that Prime Minister Narendra Modi has “always eagerly bent or changed rules to help his friends in a few large business groups” and the “latest example” was the RBI's instructions.

“The RBI knows well the dangers of its move. Two years ago, it had clearly stated that wilful defaulters would not be allowed to access capital markets and take fresh loans. As recently as 29 May, 2023, the RBI Governor warned about the many ways in which defaulters and fraudsters conceal the true status of distressed loans. Will the RBI clarify if the Modi government has pressured it to take this U-turn?” he said.

Ramesh said Indians have paid a high price for fraud and wilful defaults and banks have written off loans worth Rs 10 lakh crore between 2017-18 and 2021-22 while the recovery is an abysmal 13 per cent, which means only Rs 1 is being recovered out of every Rs 8 written off.

“The top 50 wilful defaulters, a list headed by the Prime Minister Modi’s friend Mehul Choksi, owe a substantial Rs 92,570 crore (as on 31 March, 2022). Banking frauds have risen 17-fold under the Modi government from Rs 34,993 crore in 2005-14 to Rs 5.89 lakh crore in 2015-23,” he said.

On Tuesday, Bank unions All India Bank Officers’ Confederation (AIBOC) and All India Bank Employees Association (AIBEA) opposed the move, saying allowing compromise settlement for accounts classified as fraud or wilful defaulters is an affront to the principles of justice and accountability and it not only rewards unscrupulous borrowers but also sends a distressing message to honest borrowers who strive to meet their financial obligations.