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Prevention of Corruption Act hampering NPA recovery: FM
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SME Times News Bureau | 22 Oct, 2016
Provisions of the Prevention of Corruption Act (PCA), which do not
distinguish between an erroneous and a corrupt decision, are hampering
the process of recovering non-performing assets (NPAs), or bad loans, by
state-run banks, the government said on Friday.
"I can tell you
in settling current lot of NPAs, it is this one problem alone which is
also creating challenges before officials of various public sector
banks," Union Finance Minister Arun Jaitley said.
"Today, a
private sector bank has a liberty to settle its NPAs, and officers of
public sectors banks are constrained by provisions of the 1988 PCA Act,"
Jaitley said in his address to the Accountants General Conference,
organised by the Comptroller and Auditor General of India (CAG).
"I
think this distinction needs to be finally stated. The corrupt decision
must be punishable, the erroneous decision can only give you a post
facto analysis so that the system is wiser by that experience," he said.
The
Finance Minister said the PCA's existing provisions give a lot of
discretion to the investigating officer in deciding whether a gain
accrued was fair or unfair.
"People transact with governments to
earn money...so a gain in transaction is inevitable. Whether that gain
is a fair gain or unfair gain, that distinction is to be determined,
which puts a decision maker, particularly the civil servant, in a very
difficult position in a large number of government departments," he
said.
Declaring that the time had come for a liberalised regime
that distinguishes between an erroneous and a corrupt decision, Jaitley
said the banks will have to enforce their rights and take effective
action to recover NPAs as it is constraining their capacity to lend. "We
are now coming to a stage where a lot of effective steps both in terms
of policies and legislative has been framed and therefore banks will now
have to enforce their rights in the larger interest of the economy,
because if money keeps lying blocked in a particular section, then your
capacity to lend to others is adversely affected," he said.
Gross
NPA of public sector banks has surged from 5.43 per cent (Rs 2.67 lakh
crore) in 2014-15 to 9.32 per cent (Rs 4.76 lakh crore) in 2015-16.
The
Finance Minister also said that India has not been a tax compliant
country and introduction of the Goods and Services Tax (GST) would make
it one.
"We haven't been a tax-compliant society.
Disincentivising use of cash, making tax rates conducive to compliance
are all steps being taken," he said.
"We are testing deliberative democracy and maturity of Indian democracy in the GST Council," he added.
Following
the third meeting of the GST Council here earlier this week, Jaitley,
who chairs the body, announced that it had almost reached a consensus on
compensating states for loss of revenue under the proposed GST regime,
which will permit a decision on the new tax structure at the next
meeting slated for November 3-4.
The government has set the target of implementing the pan-India GST from April 1, 2017.
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