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'RBI does't act, need to criminalise wilful default'
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SME Times News Bureau | 12 Feb, 2016
The Reserve Bank of India (RBI)
only notes cases of loan default but does not take any action and the
only reform needed in India is action against wilful loan defaulters,
said a top leader of a major bank employees union.
"The fact is
that RBI does only hissing but will not bite... This is the politics
behind bad loans. The RBI acknowledges that there are 7,035 wilful
defaulters involving about Rs.58,800 crore. Why can't criminal action be
taken against these defaulters?" C.H.Venkatachalam, general secretary
of the All India Bank Employees Association (AIBEA) told agency in an
interview.
Reacting to government owned banks reporting steep
fall in profits or net losses, ballooning of provisions against bad
loans and write-offs of bad loans, he said the RBI has been in the know
of the bad loans as it has its representatives in every bank board.
There is also a RBI audit, he noted.
"The only banking reform
that is required is a very strong law to take stringent action of loan
defaulters. Writing-off bad loans is one thing but what about
accountability?" asked Venkatachalam.
Asked as to how unions can
absolve themselves of the blame as there are two employee directors in
every bank, he said: "No doubt union leaders are functioning as
directors on the boards. But they have a limited role. They act as
watchdog in many cases.
"They protest, object, disapprove and
dissent whenever any wrong decisions are taken. But the functioning of
the board permits nothing more than this. They are personally bound by
secrecy oaths and so have their limitations."
Noting there have
been workman directors in the banks since 1971, he said that in the last
more than four decades of experience, there is not a single case where
these directors are found to be involved in any wrong doings.
"Top
bank managements find us as a hindrance and resent us as we are
effective. In some cases, our union nominee directors are targeted for
victimisation and harassment because they took strong positions on some
of the wrong decisions of the management in the board meetings," he
said.
In 22 public sector banks (PSB) out of 25, AIBEA has its representatives as nominee directors.
Venkatachalam said during the last two decades creating bad loans have become an exquisite art.
"These
bad loans are daylight robbery and loot of national wealth.
Provisioning, write off, one time settlement, interest waivers,
restructuring, asset reconstruction and others are the tools by which
the bad loans are hidden from public glare," he contended.
While the banks have collaterals for most of the loans, but they are hardly enforceable.
"In many cases, the personal guarantee of the top man of the company is waived," he said.
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