PSU banks seek shield from CBI, CVC on loans

New Delhi: State-run banks have sought immunity from “unnecessary oversight” from agencies such as the Central Bureau of Investigation and the Central Vigilance Commission on decisions related to loans that are taken collectively.
Bankers told TOIthat the issue has been flagged to the Bank Board Bureau (BBB) headed by former Comptroller and Auditor General Vinod Rai and also came up for discussion with finance minister Arun Jaitley on Monday in the context of settling loans on “commercial terms”.“Gone are the days when one bank chairman could decide. We now follow a committee-driven approach where a group of people decide on every case. Subjecting bankers to unnecessary harassment, which often takes place after retirement, is impacting decisionmaking,” a bank chief said. The latest move from banks comes against the backdrop of the high-profile case where former liquor baron Vijay Mallya has dues of close to Rs 9,000 crore and banks have mounted massive efforts to get the businessman to pay back. In the past, even top civil servants have expressed concern over the “unwarranted scrutiny” by the CBI and CVC, which they say hampers quicker decision making.
Typically, a decision is taken by a consortium of banks and is then endorsed by the respective boards. In recent years, the CBI has questioned the decision of even committees set up by banks which have taken commercial decisions, bankers said. “Which chairman will decide if your decisions are challenged regularly? We have suggested that the government speak to the agencies and sensitize them about the need to avoid unnecessary scrutiny in case of collective decisions,” the bank CEO said.
Another bank chief said that the discussions were for decisions taken in the future, especially those related to settlement of loans. “In today’s atmosphere any decision taken by bankers, which is actually in the interest of recovery, if that is subsequently questioned then it becomes difficult to take a decision. Therefore, some buffer needs to be provided,” IDBI Bank MD & CEO Kishor P Kharat said.
The issue has assumed greater significance in the wake of a pile-up of bad debt, where banks can settle the loans by reducing the penalty but are unwilling to decide, fearing adverse action from CAG or the CVC. The government and BBB are in talks to create a mechanism which involves eminent persons such as a retired judge or a former regulator apart from bankers to provide comfort to lenders in deciding on loans.
After the meeting, Jaitley indicated at a press conference that the government would empower and protect banks in case of “commercially prudent” settlement of bad debts but did not elaborate on the details. He said that the Indian Banks’ Association was discussing proposals, which the government would decide on. “One of the key considerations was that in situations like these banks should be empowered and consequently should be protected so that they can bring about commercially prudent settlements... Various suggestions have come up with regard to empowering the banks itself to function in an environment where, on commercially prudent considerations, they can deal with the situation. The government is fully committed to supporting the banks in this regard,” the minister told reporters.
Jaitley said public sector banks clocked operating profit in excess of Rs 1.4 lakh crore last year but net losses were estimated at around Rs 18,000 crore mainly on account of higher provisions for bad loans.