It’s a legislative function, says Supreme Court on plea for guidelines on bad loans
NEW DELHI: The Supreme Court on Thursday asked Bharatiya Janata Party member of Parliament Subramanian Swamy to approach the Reserve Bank of India (RBI) with his suggestions on curbing the “menace of ever-increasing” bad loans in public sector banks, noting that the court cannot issue guidelines on these policy matters.
The BJP leader filed the petition to highlight the ills in the lending mechanism of banks, which he said, could turn into a national security disaster if the current trend continues. The petition asked the court to frame guidelines on grant of loans against shares and an effective and transparent mechanism to control the menace of ever-rising non-performing assets (NPA).
The bench of justices Dhananjaya Y Chandrachud, Vikram Nath and BV Nagarathna said, “How do we frame guidelines? This is basically a legislative function. Both the Reserve Bank of India and the ministry of finance have been framing guidelines for banks and financial institutions from time to time to deal with the situation.”
The court told the MP to approach the RBI with the material he had gathered as the reliefs sought were clearly in the realm of policy domain which the RBI is well equipped to handle. Swamy told the court, “Extraordinary secrecy prevails in RBI over such matters. The ministry of finance and RBI have been issuing orders but that will not bar courts from entertaining such petitions. When a bank closes down, people don’t get their hard-earned savings. They have no representation when such decisions are taken.”
His petition further stated, “The malaise is such that the same might lead to a complete malfunction of the economy and a collapse of the financial system causing chaos, widespread unemployment and loss of personal savings of the people. This state of affairs now has morphed the earlier trends into a national security disaster.”
The bench said: “These matters cannot be decided by judicially manageable standards. In a matter of this nature where the relief sought is to constitute an expert committee, the core issue is of policy, which pertains to the realm of the legislature.”
The court allowed Swamy to submit a representation to RBI or even forward his petition to enable the RBI to take a considered view on the concerns raised in the petition.