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Unsettled debt recovery cases cross Rs 4 lakh crore

Economic Survey points to weakness of Debt Recovery Tribunals and the fear of investigative agencies preventing public bank managers from taking prudent decisions

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Even as the debate over bad loans (non-performing assets or NPAs in banking parlance) grows, the Economic Survey has pointed out that the number of settled cases is steadily declining in India. While banks have approached the Debt Recovery Tribunals (DRTs), the inherent 'weakness' of these tribunals in doing their job of recovering the money has hampered the process of recovery. So much so that the amount involved in unsettled cases crossed well over Rs 4 lakh crore in 2015.

The survey also has a veiled reference to high-profile corporate wilful defaulters in India. The survey notes, "Another stark example of weak institutions is simply the inability to punish wilful defaulters: if demonstrable wrongdoing goes unpunished, the legitimacy of all institutions is called into question."

While lamenting that the growth of bank credit remained merely at 10% as compared to 20% during India's high-growth phase between 2003-2008, the survey also listed out several reasons for the abysmal credit growth. One of the primary reasons was the unwillingness of banks to lend on account of rising NPAs in addition to the worsening of corporate balance-sheets.

The survey pointed out that only 10 corporate groups in India accounted for the bulk of its private capital expenditure and also owed the most money to banks. While stressing that these corporate groups must be made accountable under the Perpetrator Pays Principle (PPP), "tricky trade offs" needed to be made to make them pay.

The survey stated that one of the primary reasons behind the inability of public bank managers to take decisions like writing off loans from their books was the "Damocles sword" of strong investigative agencies in India. The survey noted that investigative agencies had grown immensely powerful in India over the past few decades. It goes on to say, "In the case of public sector banks, it is well-known that senior managers are often reluctant to take decisions to write down loans for fear of being seen as favouring corporate interests and hence susceptible to scrutiny. This encourages ever-greening of loans, postponing exit."

 

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