SC asks RBI for status report on panel views

Court will also take up case of debt-recovery tribunals

The Supreme Court on Friday directed the Reserve Bank of India (RBI) to state the action taken on a bad-loan report, by July. The court will also take up the case of debt-recovery tribunals, whose infrastructure has been found to be inadequate.
 
The report on non-performing assets (NPAs), filed by a panel set up by the government at the request of the court, has suggested reforms in lending practices of public sector banks and other financial institutions. It has proposed detailed norms for sanctioning loans, fixing personal liabilities of officers, and transparency in the lending process. Above all, the committee is said to have suggested publication of names of defaulters on websites. Lawyer Prashant Bhushan, who raised the issue of NPAs in a public interest suit, submitted before a court that the asset-restructuring route is abused by big borrowers. The banks sell the mortgaged assets to restructuring companies at a heavy discount and the latter, in turn, sell the assets at a larger discount to other companies, sometimes to the original company, which started it all. So the latter gets the mortgaged assets sometimes at one-fourth of the market price. Decisions are taken in the boardrooms in secrecy, the lawyer said. The report, according to Bhushan, suggests steps to stop “bank-shopping”, with the borrower going from one institution to another till he gets another loan without disclosing his defaulting background.

 
The report also suggests safeguards against sale of assets of companies and restricts writing off loans without good reason. The RBI had earlier given to the court in a sealed cover a long list of companies which have more than Rs 500 crore in unpaid debt. The court on Friday made mild threats to disclose the list, but the central bank protested this.