The Finance Minister, Mr Pranab Mukherjee, spurned the demand of certain Members of Parliament to disclose the names of corporates defaulting in loan repayment to public sector banks.
The disclosure of their names in a public forum (such as Parliament) will make the banking industry more sick, Mr Mukherjee told the Lok Sabha. He also highlighted the aspect of confidentiality clauses (in loan agreements) coming in the way of releasing the names of defaulters.
“If this (disclosing names) is done, a person will be declared insolvent even before the Court declares them (defaulters) as insolvent. And whatever possibility of recovering money from them will go. It will be depositors' money that will be lost (if we disclose)”, he said.
The Finance Minister noted that he had been discussing the issue of non-performing assets (NPAs) with the chief executives of PSBs and the Chief Ministers of various States during their Zone-level meetings.
Mr Mukherjee said that banking institutions were already working with certain norms. “Indian banks have been able to withstand the pressure and adverse impact of the global financial meltdown because of the solid foundation and basic principles of management”, he said.
Mr Mukherjee was responding to supplementaries by Mr Basudeb Acharia (CPI-M) and Mr Lalu Prasad Yadav (RJD) during Question Hour. Both Mr Acharia and Mr Prasad demanded the tabling of the names of corporate defaulters and blamed big corporate houses and industrial families for dodging the laws.
The Finance Minister said that the ratio of gross non-performing asset (NPA) to gross advances of public sector banks decreased from 2.34 per cent as on March 31, 2008 to 2.27 per cent as on March 31, 2010. However, the ratio increased from 2.26 per cent to 2.31 per cent and from 2.90 per cent to 3.22 per cent for old and new private sector banks respectively during the same period.
In absolute terms, the gross NPAs of PSBs increased from Rs 39,749 crore as at end March 2008 to Rs 57,301 crore as on March 31, 2010.
PSBs' bad loans write-off in 2009-10 stood at Rs 10,040 crore, reflecting a 45-per cent increase over write-off level of Rs 6,929 crore in 2008-09.
The increase, in absolute terms, is broadly on account of the consolidated impact of business cyclicality, economic slowdown, delay in implementation of projects and consequent repeated restructuring of accounts by banks and credit growth across the banking industry during the last few years, he said.
New legislation ruled out
Meanwhile, the Government has ruled out enactment of any new legislation for recovery of NPAs. “Existing laws available with us are sufficient and I do not see any need to go in for new legislation”, Mr Mukherjee noted.
Mr Mukherjee also made it clear that the Government's interest was to reduce the NPAs and to recover the outstanding loans whether it was from big, small or medium sized accounts.
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