Wilful defaulters: make list public

It should be a matter of embarrassment for the Reserve Bank of India (RBI) that its conduct has come in for adverse scrutiny by the Central Information Commission (CIC). The commission has issued a notice to RBI Governor Urjit Patel to show cause why the “maximum penalty should not be imposed on him’’ for the central bank’s persistent refusal to disclose the names of wilful defaulters of bank loans. As early as 2015, the Supreme Court had directed the RBI to make the disclosure in accordance with the RTI Act. The court had said that the RBI should put public interest above the interest of any bank, which wants to keep the defaulters’ names secret. Arguments based on customer secrecy or the need to maintain fiduciary trust between the banks and their clients are not strong, because the defaulters are violators of the law. Central Information Commissioner Sridhar Acharyulu also reminded the banking regulator that it had the responsibility to respect the orders of other constitutional bodies. 

The burgeoning NPAs of public sector banks in the form of loans not repaid by borrowers is a major problem not only for the banks but for the entire economy. The bad loans have been steadily increasing and now form over 11.6% of all bank loans. Former RBI governor Raghuram Rajan had sent a list of major loan defaulters to the government in 2015. But the government has not made it public and not disclosed what action it has taken. There is an unwillingness on the part of authorities in the banking sector and in the government to take effective action to recover bad loans. Such unwillingness becomes complicity in crime and amounts to protection of criminals in many cases. If the government and authorities had been vigilant, Nirav Modi and others like him would not have found it easy to milk the banks and escape with the stolen wealth. 

The country’s banking system, dominated by public sector banks, and the larger economy cannot hope to gain strength without action on the bad loans. The CIC’s directive shows how both the RBI and the government have been lax in the matter. It has strongly criticised the government also and asked the finance ministry to initiate action agent wilful defaulters who owe more than Rs 50 crore to the banks and take criminal action against them. The present government has blamed past governments for the huge bank NPAs, but it is now known that NPAs have actually grown faster under this government. If it is sincere, it should take action against defaulters and recover money from them. The RBI should, as a first step, disclose information on loans of Rs 1,000 crore and above before the November 16 deadline set by the CIC. 

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