Friday, 3 October 2014

Public sector banks hiding bad loans’ size: Ex-CVC

Former central vigilance commissioner Pradeep Kumar

NEW DELHI: Restructuring of loans on easy terms may not be the best solution to tackle the bad loans of public sector banks (PSBs), former central vigilance commissioner Pradeep Kumar said, and expressed concern that state-run banks were probably suppressing the size of the "real crisis involving NPAs (non-performing assets)".

For over two years, the CVC has been pursuing several cases of NPAs, many of which are suspected to be the result of an organized fraud, and has played a key role in referring some of the cases to the CBI for criminal investigation. He has conducted detailed vigilance inquiries into some of the biggest bank loan defaults, and has recommended disciplinary action against dozens of bank officials.

"Willful defaulter is a process. There are two types of things happening — one is the declaration of someone as a willful defaulter, the other is restructuring of loans. Restructuring of loans is taking place with easier conditions. Both are of concern. NPAs are getting suppressed — the RBI has taken note of it," Kumar, who retired this weekend, told TOI in an interview. "There is a lot of corporate restructuring happening, but even then loans are not getting alright," said Kumar.

The former CVC's comments come at a time when sources in the CBI and other investigating agencies are also pointing out that PSU banks may be suppressing the extent of bad loans in the sector.

Kumar said, "It comes as a concern when the banking sector is taken for a ride by corporates in connivance with bank officials. There have been a number of cases of bank frauds and that is an area we are looking into closely."

The former CVC said bank officials must act responsibly and have to be accountable for their actions. Kumar said the appointment of bank directors have to be fair and transparent "as they are ultimately responsible for all large decisions of the banks".

A senior investigator recently said banks were reluctant to declare loans as frauds despite overwhelming evidence because of its implications — for its senior staff and the balance-sheet.

CVC inquiries have revealed several cases — Winsome Diamonds which has an NPA of Rs 6,500 crore, Biotor's Rs 1,100 crore and Mahuaa TV with almost Rs 1,800 crore. The government has taken several steps to tame the problem of bad loans. It is also amending laws to help banks recover their dues and stop the fund flow to suspect companies.



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