‘Banks enter danger zone with increase in bad loans’

Hyderabad: All India Bank Employees Association (AIBEA) has said that the banking sector has entered in a danger zone with non-stop increase in bad loans.

In a circular to all its units and members recently, AIBEA General Secretary Ch Venkatachalam said Non-Performing Assets in the Banks have reached alarming proportions. It is more than Rs 15 lakh crore, he added.
He said the government has recently admitted in a written reply in Parliament that there are 9063 Wilful Defaulters who together owe Rs 1,10,050 crores to the banks. ”From AIBEA we have been demanding that at least the wilful defaulters should be brought under criminal proceedings. This is being deliberately skirted and avoided.

”Our long pending demand to publish the names of the bank loan defaulters is yet to be accepted by the Union Government and the RBI. However, the government is keen that all types of concessions are showered on these defaulters. No wonder, we allege that there is clear nexus between Government, politicians, bureaucrats, bankers and borrowers,” Venkatachalam, who is also the Chairman of Coordination Committee of Bank, Insurance and Finance Sector Unions (CCBIFU), said.

He said even in the past, there have been velvet treatment to the defaulters one time settlements, interest waivers, compromise settlements, rescheduling, restructuring, CDR, SDR, S4A, provisioning and write off etc.
For the small borrowers, farmers, students, the recovery laws are stringent and they are being unduly harassed. For the big borrowers, it is concessions all the way. the top Union leader lamented.

”From AIBEA we demand recovery of bad loans. But Government talks of resolving bad loans. IBC is their resolution module. But RBI has already indicated that in this processes there would be steep haircuts. The haircut is clearly visible now,” Venkatachalam said.

Banks sign pact for bad loan resolution

  • Banks and financial institutions, including SBI, PNB and LIC entered into an overarching inter-creditor agreement (ICA) to fast track resolution of stressed assets of Rs 50 crore or more which are under consortium lending.
  • The agreement gives a bigger say to the lead lender in a consortium and allows a resolution plan to be approved if 66% of the banks in the group agree to it. Dissenting lenders have option to sell stressed loans.
  • Once a resolution plan is approved by the majority lenders, it will be binding on all the lenders that are a party to the ICA, it said.
  • Each resolution plan that is formulated in terms of the ICA shall be in compliance with the RBI circular and all other applicable laws and guidelines, it said.
  • Top lender State Bank of India was among banks which signed the agreement.
  • India’s banks had 12.5% of their total loans categorised as non-performing or restructured at the end of March.
  • The ICA is being signed by 22 PSBs (including India Post Payments Bank), 19 private sector banks and 32 foreign banks. Besides, 12 major financial intermediaries, like LIC, HUDCO, PFC and REC are also signatories to the pact

 The Demand 

We have been demanding that at least the wilful defaulters should be brought under criminal proceedings Our long pending demand to publish the names of the bank loan defaulters is yet to be accepted by the Union Government and the RBI. However, the government is keen that all types of concessions are showered on these defaulters. No wonder, we allege that there is clear nexus between Government, politicians, bureaucrats, bankers and borrowers. Ch Venkatachalam, AIBEA General Secretary