‘Processes are long in bank loan write-offs’: Sitharaman on recovering money

On Tuesday (December 13), Sitharam informed the Rajya Sabha that banks have written off bad loans amounting to ₹10,09,511 crore during the last five financial years

Finance Minister Nirmala Sitharaman informed the Lok Sabha on Monday that the process of recovering money for small depositors following bank loan write-offs is a layered and time-consuming process while referring to the case of the Punjab & Maharashtra Co-operative (PMC) Bank, where depositors are challenging the Delhi High Court for the restrictions imposed on their withdrawals.

Union Finance Minister Nirmala Sitharaman (File Photo)

The FM was responding to the question raised by Nationalist Congress Party (NCP) MP Supriya Sule on the process of recovering money from their banks by small depositors who face difficulties referring to the case of PMC bank.

The Delhi High Court earlier this month dismissed a petition by depositors of the PMC Bank challenging the restrictions imposed by the Reserve Bank of India (RBI) on withdrawals from their bank accounts.

Replying to Sule, FM Sitharaman said, “The processes are very layered, and it does take a long time. There are times when there are even sets of defaulters. Even if the assets of these defaulters are attached, it requires a very complicated process through the court.”

Referring to the example of PMC Bank, the FM said, “If we approach the court and request them to release a portion of what was attached by the agencies that went to enforce it. The courts wouldn’t allow you to detach that portion for giving relief to bank depositors.”

“Your intentions may be good, but the process is so long that the investors and depositors don’t get their money back. So who really benefits from this write-off?” Sule had asked and requested the union finance minister to shorten the process.

To this, Sitharaman said, “I agree with the MP, the processes are so layered that by the time justice is sought to be delivered, many of the small depositors are put through extreme difficulty. There definitely is a need to look at how we can simplify the process without denying justice.”

Sule’s question came in as a supplementary question to Congress MP Deepak Baij, who questioned the government over the re-acquisition of funds after bank loan write-offs.

On Tuesday (December 13), Sitharam informed the Rajya Sabha that banks have written off bad loans amounting to ₹10,09,511 crore during the last five financial years.

As borrowers of written-off loans continue to be liable for repayment and the process of recovery of dues from the borrower in written-off loan accounts continues, write-off does not benefit the borrower, she had said.

The petitioners, who collectively held fixed deposits of over ₹90 lakh in the PMC bank, had argued that the actions of the RBI were arbitrary and deprived innocent depositors of access to their own savings. While dismissing the petition, Justice Prateek Jalan, despite sympathising with the petitioners, noted that he was unable to grant relief to them.

In the case of PMC Bank, the court noted that PMC Bank was first restricted in 2019 from releasing an amount over ₹1,000 from the total balance in each savings account, current account, or deposit account. This amount was raised to ₹40,000 after viewing the bank’s financial position which was reportedly substantially impaired due to fraud perpetrated on it by certain persons.