New Delhi: The government will wait for concrete evidence before taking any action against the chiefs of state-run lenders Indian Bank and Syndicate Bank—Kishor Kharat and Melwyn Rego, respectively—against whom the Central Bureau of Investigation (CBI) has filed a case in the Rs600 crore loan to former Aircel promoter C. Sivasankaran, a senior government official said on Monday.
“We will not take any action based on hearsay. The moment I have concrete information from investigation side, supervision side, or regulation side, government will not hesitate to act," Rajiv Kumar, secretary, department of financial services said, seeking to assure bankers that the government would not take any hasty steps.
At the same time, it has directed government nominee directors to attend all board meetings and ensure the implementation of the government’s clean banking agenda, while hastening the process of filling vacancies in the top management of state-run banks.
Kumar said this in a press briefing after announcing the government’s decision to initiate the removal of Allahabad Bank MD and CEO Usha Ananthasubramanian and two executive directors of Punjab National Bank, K.V. Brahmaji Rao and Sanjiv Sharan, after the CBI named them in a chargesheet in the Rs12,636 crore PNB fraud case involving jewellers Nirav Modi and Mehul Choksi.
Kumar said the worst was over for the banking system with all the bad debts recognized and ruled out increasing the capitalization package for state-run banks battling huge losses due to higher provisioning for bad debts.
“The NPAs have been recognized, the provisions have been made and the losses booked. So the worst is over and positive, clean lending will take place," he added.
In 2017-18, more than Rs1 trillion was infused into state-run banks through a mix of recapitalisation bonds (Rs80,000 crore), direct infusion from budgetary allocations (Rs8,139 crore) and capital raising from the market (Rs10,000 crore).
However, with most of the state-run banks reporting massive losses following a Reserve Bank of India circular requiring them to reclassify restructured accounts as NPAs and the resulting provisions for this. Kumar also said banks under the prompt corrective action framework should adopt differentiated banking strategies.
The government will hold a review meeting of all 11 banks under the central bank’s prompt corrective action framework on 17 May.
The meeting comes at a time when banks such as Dena Bank and Allahabad Bank have been asked by the RBI to cease any fresh lending.