PMO seeks panel to tackle rising cases of bad loans, bank frauds

Upping the ante against burgeoning non-performing assets (NPAs) of public sector banks and rising cases of frauds, the Prime Minister’s Office has asked for the setting up of a high-level committee to work on a long-term solution for designing a focussed anti-fraud strategy.

Upping the ante against burgeoning non-performing assets (NPAs) of public sector banks and rising cases of frauds, the Prime Minister’s Office has asked for the setting up of a high-level committee to work on a long-term solution for designing a focussed anti-fraud strategy.

NPAs refer to loans that do not yield returns.

While the first meeting on the issue — chaired by Nripendra Mishra, principal secretary to the PMO — was held in the first week of March, the most recent meeting was held on Thursday and chaired by the banking secretary, sources familiar with the development told HT on the condition of anonymity.

The committee will include top officials of the department of financial services, corporate affairs ministry, Central Bureau of Investigation, Enforcement Directorate, Reserve Bank of India and the Serious Frauds Investigation Office.

“In the last 10 years or so, corporates have taken huge loans from PSU banks for some end-use including development of highways, setting up of power plants, textile units and also for realty projects,” sources said. “Many of these loans have become NPAs. Now every PSU bank has been asked to come up with a list of those accounts in which the value of the NPA is more than Rs 100 crore.”

The high-level panel will bring about structural and regulatory changes relating to reporting, investigating and action taken in cases of high-value bank frauds, besides formulating a set of standard operating procedures that will be adhered to by all agencies.

“Since high-value loan amounts of Rs 100 crore or more are sanctioned at the board level, banks have been found reluctant in sharing these bad loan cases with investigating agencies,” sources said. “And by the time they actually share these reports with RBI and law enforcement agencies, it is already too late.”

“In the near future, banks may also be asked to put up the names of such large-value defaulters on their websites,” the source added.

Minister of state for finance Jayant Sinha recently said that as of December, 2014, gross NPAs of PSU banks stood at Rs 2,60,531 crore, while the top 30 defaulters were sitting on bad loans of about Rs 95,122 crore, or 37% of the entire NPAs of public sector banks.