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Mechanism to recover NPAs not up to the mark: TS Thakur

On the day he retired, Chief Justice of India TS Thakur heard the non-performing assets (NPAs) case and questioned how the government would step up the debt recovery process. Do these tribunals have the infrastructure to function ably, he asked.

In an interim order passed by a three-judge Bench, the top court raised several issues regarding the Centre’s debt recovery mechanism and asked if the tribunal was equipped to decide cases of loan recovery in a timely manner.

“There are lakhs of crores of rupees as NPAs and one of the reasons for their non-recovery is that the mechanism for recovery is not up to the mark,” the Bench had said.

Legislative changes to provide for expeditious disposal of proceedings before the Debt Recovery Tribunals may not by themselves achieve the intended object so long as the infrastructure provided to the Tribunals is not commensurate with the burden of the work and nature of judicial duties,” the order authored by Justice Chandrachud read.

The matter takes on added importance since the Reserve Bank of India (RBI) wrote off bad corporate loans to the tune of Rs 40,000 crore in 2015. In 2016, the amount reached a whopping Rs 85,000 crore from 57 borrowers.

In October, the top court had asked the RBI why names of the 57 borrowers who have defaulted on bank loans should not be made public. “Who are these people who have borrowed money and are not paying back? Why this fact that the person has borrowed money and not paying back be not known to public.” The Bench further stated that if the bar was lowered below Rs 500 crore, then the default amount would cross over Rs 1 lakh crore.

Accordingly, the Bench directed the Centre to submit empirical data on the pendency of cases for more than ten years and the list of corporate entities where the amount outstanding is in excess of Rs 500 crore.

The order came in reply to a 2003 PIL filed by the Centre for Public Interest Litigation (CPIL), which brought to the top court’s notice the actions of state-owned Housing and Urban Development Corporation (HUDCO) officials who were arbitrarily granting loans for political and extraneous considerations without going in to the merit of each case. In this PIL, the advocacy group also pointed out that in some cases prescribed/established procedures were ignored.

The Supreme Court’s interim order on NPAs assumes more importance in the light of recent Financial Stability Report (FSR) released by RBI last week, which says that public sector banks (PSBs) are nowhere near revival when it comes to recovery of bad loans. Banks recovered only Rs 22,678 crore in the financial year 2016 as compared to Rs 30,792 crore in 2015.

The report said that Public sector banks far behind from private lenders in loan recoveries. PSU banks could only recover Rs 19,757 crore last fiscal year against Rs 27,849 crore in fiscal 2015.