Arun Jaitley defends IBC ordinance, says no loan waiver for big defaulters2 min read . Updated: 28 Nov 2017, 09:40 PM IST
Arun Jaitley says under the new Insolvency and Bankruptcy Code, cases have been instituted in NCLT for time-bound recovery from 12 largest defaulters in 6-9 months
New Delhi: Finance minister Arun Jaitley on Tuesday defended recent steps taken by the government to tackle bad loans in the Indian banking system and blamed aggressive lending during the years the United Progressive Alliance (UPA) was in power for the pile-up of toxic assets.
In a blog, the finance minister also defended amendments to the Insolvency and Bankruptcy Code (IBC) through an ordinance aimed at keeping wilful defaulters away from regaining control of their assets.
The government has been criticized by opposition parties for introducing amendments to IBC through an ordinance. The ordinance, which came into effect last week after receiving the President’s signature, bars errant promoters of defaulting companies as well as guarantors to the debtor, directors in the companies that are disqualified and those with loans classified as non-performing assets (NPAs) for at least a year from regaining control of the assets being sold under the bankruptcy process.
“Government has not waived any loans of big NPA defaulters. On the contrary, under the new Insolvency and Bankruptcy Code brought by the government, cases have been instituted in the National Company Law Tribunal (NCLT) for time-bound recovery from 12 largest defaulters in six to nine months, in NPA cases of Rs1.75 trillion. Cases for the recovery of NPA dues from the assets of these big defaulters are under way at various stages," he said.
Jaitley also said the government’s massive Rs2.11 trillion bank recapitalisation plan for PSU banks announced last month will help strengthen their balance sheets.
Bad loans of state-run banks almost tripled to Rs7.3 trillion, as of June 2017, from Rs2.8 trillion in March 2015 after the Reserve Bank of India (RBI) initiated an asset quality review to recognize bad loans in banks’ books.
The finance minister attacked the Congress-led UPA, terming the period from 2008 to 2014—when the coalition was in power—as one of “aggressive lending".
“Between the years 2008 to 2014, public sector banks disbursed disproportionate sums of loans to several industries..... when these debtors delayed in repayment of their loans and interest thereon to public sector banks, what decision was taken by the then government," Jaitley said.
“Rather than take firm decision with regard to such debtors, the then government, through relaxation by banks in loan classification kept these defaulters as non-NPA account holders. These loans were restructured through this, the loss to banks was kept hidden. The banks kept giving loans repeatedly to these debtors and kept ever-greening the loans," Jaitley added.