There has been wide ranging discussion about money of Indians lying in foreign banks. The amount is understood to be a few thousand crores. This amount is lying abroad is invisible and recovery unsure. But we are paying little attention to Rs. 3 lakh crores in India as non-performing assets (NPAs) in the scheduled banks. So why not accord priority & recover this amountIJ
Former Finance Minister Shri Jaswant Singh said on the floor of Parliament in 2002 that "NPAs are not bad debts, they are loot".
As per RBI information total NPAs of all scheduled Commercial Banks in India was Rs 71,113 crore (as on March 31, 2002), Rs 1,37,100 crore (as on March 31, 2012), Rs 1,79,721 crore (as on March 31, 2013), while on March 31, 2014 the figure rose sharply to Rs 3,00,000 crore.
It will be noticed that during 10 years period from 2002 to 2012 NPA amount increased by Rs 66,000 crore in 10 years, where as it has touched alarmingly high figure of Rs 62,000 in one year in 2012-13 and Rs 1 lakh crore in 2013-14. If figures of financial institutions and co-operative banks are added it may be another few lakh crores. Besides, there is large amount written off by banks while making one time settlement of NPA accounts of which figures not available.
My analysis of information I received of 17 banks show that number of NPA accounts below Rs 1 crore was 45.25 lakh which is 99.49 per cent of total NPA accounts in number. Value wise total NPAs in these accounts was Rs 40,948 crore which is 35 per cent of the total value.
This means that that just 0.5 per cent of total accounts have 65 per cent of the total NPA amount. One such bank, for an example, has 73 per cent of NPA stuck in just 30 accounts.
But the Banks target the small NPA account holders despite the fact that the cost of recovery is much higher than the realisation resulting in futile exercise. But banks still go after these small account holders as they are easy prey to harassment by Banks and that such small amount holders are unable to defend themselves in courts as it requires high legal expenses. Most of them have already lost their securities or collaterals to the banks. This has also resulted in DRT being heavily burderned with such cases without any tangible results.
A balanced scheme of amnesty for small NPA account holders (1 Crores or below) say for example a fixed amount of Rs. 10 lakhs for one cores & prorate for lesser amounts to be recovered as full & final settlement can be a solution.
Such a scheme would result into immediate realisation of say Rs 75,000-Rs1 lakh Crore, thus improving bank liquidity. Also it will reduce legal cases on DRT and Courts thus giving them time to concentrate on bigger accounts. Moreover it will bring the cost of recovery to zero and also the staff in the Banks can devote time on more productive work. Regarding large accounts borrowers must be having good relations with the Banks & hence try to settle these accounts on one to one meetings with flexible approach.
If not, banks should immediately encash their securities & may even refer to investigating agency like CBI, to find out if money has been diverted to other companies or for other purposes. Or whether funds have been siphoned abroad, and also help identify willful defaulters and take punitive action.
One of the drawbacks with the Bank is that the moment the account becomes NPA it is transferred from mainstream to Asset Recovery cell who is not conversant with the accounts, its problem & hence this cell takes a very unrealistic approach. It is not a reconciliatory or flexible approach but rough & suspicious approach which is unrealistic.
Actually Banks must have a time bound action for the recovery & not linger it too long. Such large amounts can be pumped back into economy with effective recovery process. A Central committee be formed under the Ministry of Finance (Department of Financial Services) which can set guidelines, has authority to decide, monitor each Banks actions & progress.
(The writer is a Management Consultant and former Chairman of State Trading Corporation and Consultant to Ministry of Commerce.)
Figures obtained through RTI courtesy Council of Veteran Industrialist.