• SC pulls up RBI, questions why farmers have to pay while defaulters run away

    April 13, 2016

    In a statement released by the Supreme Court on Tuesday, the apex court pulled up the Reserve Bank of India, questioning why the farmers have to pay while the defaulters run away with the country's money. The statement has come out only weeks after the RBI released a list of its own mentioning the names of individuals who owe Rs. 500 crores or more to the public sector banks in India.

    The Supreme Court, in its statement, questioned the governing body, over what it called “mind boggling” number of bad loans given out by state owned banks. The apex court also stated that while the poor have to pay back the loans by selling off their hard earned land and property, the defaulters who owe thousands of crores get away with the money. The statement comes only days after the whole controversy over the Latur drought reports surfaced in the media and also weeks after the SC heard the Vijay Mallya case.

    A bench led by Chief Justice T S Thakur told the RBI that the amount of bad loans disclosed in the regulator’s affidavit makes it clear that the “outstanding is very large”. The court also asked the RBI to inform them how the governing body is planning to tackle the amount of bad loans and how they will be able to procure the repayment of them.

    RBI was asked to explain the huge amount of loans written off by public sector banks (PSBs) in the last five years after the bench took suo motu cognizance of the fact that Rs 1.14 lakh crore had been written off as Non-Performing Assets (NPAs) by 29 state-owned banks in the last three years.

    “Are you not supposed to keep vigil? Is RBI not supposed to maintain information and act on how public sector banks are advancing loans? These banks are supposed to act prudentially but if they have been doing it by flouting norms and without ensuring adequate assets as securities, are you not supposed to take actions against them? RBI is the regulator… you must act as a watchdog,” the bench told RBI’s Counsel Jaideep Gupta. The bench also added “What is this happening? There are people who take thousands of crores in loans and they manage to run away. Banks are left to waive the loans or restructure them. On the other hand, farmers getting some thousands in loans are compelled to even sell their lands if they cannot repay.”


    The SC is doing the right thing by questioning the RBI because in many incidents spanning the last few decades, the inability to establish credibility has left the public sector banks literally begging big time defaulters for repayment. A perfect example is that of the former liquor baron Vijay Mallya. Had the banks been more careful about the whole situation, timely repayments would not have been such an issue. While big time investors and corporate maharajas look forward to RBI for hikes or decreases in interest rates, the larger mass of the country still concerns them with the fact that they will have to put food on the table of their family the next time. That will not be easy with public sector banks coming down on them with double edged swords while letting go serious defaulters.



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