Finance minister P Chidambaram on Monday asked banks to go after wilful defaulters, sought the removal of sectoral caps on foreign direct investment (FDI) and argued in favour of an interest rate cut ahead of the Reserve Bank of India (RBI’s) monetary policy review on Tuesday.
“We have argued on the government side that there is a case for lowering policy rates,” said Chidambaram fater meeting the heads of public sector banks. “I think the RBI governor is also aware of the issues about liquidity and tomorrow is the monetary policy. I am sure he will address the issue of liquidity.”
The RBI is expected to slash key lending rate, the repo rate — the rate at which it lends to banks — by 0.25 percentage poinits in its review on Tuesday.
“We cannot have an affluent promoter and a sick company. Promoters must bring in money ... We wish banks take firm steps to recover NPAs,” he said.
NPAs are non-performing assets or bad loans.
Wilful defaulters are borrowers who have not repaid loans of more than R25 lakh despite having the capacity to do so, who divert funds to projects other than those for which the loan was availed and who sell off assets that were pledged to get loans without the bank’s knowledge.
Banks are planning to take a tough stance on such defaulters including a ban on floating new ventures and, in some cases, pressing of criminal charges.
As on March 31, 2012 nearly Rs. 60,000 crore of funds are locked up with such individuals or firms.