The Supreme Court criticised the Reserve bank of India on Tuesday, saying banks were pursuing distressed farmers for loan payments but weren’t bothered by mounting bad corporate debt.
A top court bench of Chief Justice TS Thakur and justice R Banumathi reminded the RBI of its duty as a watchdog and wanted to make public the “mind boggling” amount of bad loans held by banks.
But the central bank opposed the idea, saying it will have major ramifications on the economy.
“Companies take loans from banks, run their empires and declare themselves bankrupt. You don’t take money from them but banks are after poor farmers who are unable to pay due to crisis,” the bench said.
The court was examining a list submitted by the RBI that named defaulters who owed more than RS 500 crore to banks and wanted to disclose the outstanding amount.
“We do not want to make the names public. But the mind-boggling amount can be disclosed. It’s a substantial amount and makes out a case for us to hear it further,” the bench told the RBI.
Rising debt default hit the headlines in February when 29 state-owned banks said they wrote off Rs 1.14 lakh crore of bad debts between 2013 and 2015. This figure was much higher than that in previous years.
The next month, the government told the top court that embattled liquor baron Vijay Mallya left India despite probes against him for defaulting on loans worth around Rs 9,000 crore.
In contrast, farmers across the country have been hit by unseasonal rainfall and two successive droughts that have hurt crop yields and ravaged farm incomes.
The court’s comments came after the RBI counsel suggested banks should be heard to determine why loans were written-off or restructured. He said the central bank did not monitor daily functioning of banks and could not respond to specific court queries.
But the court asked him, “If a bank does not manage funds prudently and there is no hope of recovery, what do you do? Aren’t you supposed to keep a vigil and take action if banks violate guidelines or are found in the wrong?”
The RBI assured the court it did so and will disclose on directions. But it added, the details should not be made public.
The top court is hearing a 2003 public interest litigation (PIL) where the petitioner - Centre for Public Interest and Litigation (CPIL) - alleged state-owned Housing and Urban Development Corporation (HUDCO) wrote off debt worth RS 40,000 crore.
In the last hearing, the bench widened the PIL’s scope and made RBI a party, asking it to submit names of defaulters who owe more than Rs 500 crore to banks.
The SC bench told solicitor general Ranjit Kumar to appear on behalf of the Union finance secretary and issued notices to banking associations.
The court fixed April 26 to hear the matter and permitted petitioner CPIL’s counsel Prashant Bhushan, the solicitor general and the RBI advocate to formulate questions to be considered.
The court told Bhushan one of the issues framed should be whether the information pertaining to the outstanding amount is confidential, though the lawyer held a firm view it wasn’t in the wake of a 2015 SC verdict that brought the RBI under the ambit of the Right to Information Act.
Bhushan’s contention was disputed by the banking regulator that said information could be disclosed subject to certain conditions in the special law governing RBI’s functioning.
“After decentralisation ,certain amount of decision has been left to the banks,” the advocate told the bench, saying it was important to hear the banks.