Govt will soon bring in law to check chit fund schemes: Arun Jaitley
Arun Jaitley says the new law will regulate chit fund schemes to protect investors and that banks will refer more NPA cases under bankruptcy laws
New Delhi: Finance minister Arun Jaitley said on Thursday that a new law to regulate chit fund schemes to protect investors will be brought in soon, and state-run banks will refer more stressed assets for bankruptcy resolution.
Replying to a debate on The Banking Regulation (Amendment) Bill, 2017 in the Lok Sabha, the minister said that there needs to be a political consensus as well as the will to address the problem of non-performing assets (NPAs), as state-owned banks seeking to honestly address the problem through certain steps were facing the anxiety of being questioned about their decisions by investigative agencies years later.
The bill, which replaced an ordinance promulgated in May empowering the Reserve Bank of India (RBI) to deal with bad debt was later passed by a voice vote in the house.
The RBI has already identified the top 12 loan defaulters for bankruptcy resolution, but some of the promoters have objected to the defaulting companies being referred to the National Company Law Tribunal (NCLT) by banks for insolvency resolution, arguing that the lenders’ move was arbitrary.
“No one can claim the right of equality in not paying banks back. RBI has taken up some difficult cases... I am sure they will take up more,” the finance minister told the Lok Sabha.
“We need to save the companies, the jobs and we need liquid companies to pay the banks,” he added. Jaitley, however, ruled out the government taking over stressed companies in the power and textile sectors as it would be difficult for the government to run them.
The idea of the new pan-India law on chit funds is to ensure that those who are lured into these schemes by the marginally higher interest rates that they offer as compared to banks are not taken for a ride.
“SEBI is looking into the existing chit fund cases. There are state laws to deal with them in Bengal and Odisha. But what to do with those who run operations throughout the country? We are drafting a central law and very soon we will bring it before you,” the minister told the house. Meanwhile, safer investment instruments such as the Pradhan Mantri Vyaya Vandana Yojana (PMVYY) that offers senior citizens an 8.3% fixed rate of return are being made available, the minister said.
The minister also expressed confidence that lending rates will come down in the economy, as high rates will only keep the industry uncompetitive and consequently discourage investments.
“Slowly, interest rates will become reasonable,” he said.
RBI, in its third bi-monthly monetary policy of the fiscal, on Wednesday reduced the repo rate after a gap of almost 10 months by 0.25 basis points to 6%.
Jaitley told lawmakers that the rate cut was an important step to achieve sustained growth consistent with moderate inflation and India’s potential.