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NPA recovery hit by flaws in anti-corruption Act: Jaitley

Amendment to Act likely in the winter session of Parliament, say Sources

Arun Jaitley
Arun Jaitley
Indivjal Dhasmana New Delhi
Last Updated : Oct 22 2016 | 12:48 AM IST
Finance Minister Arun Jaitley said on Friday the existing provisions of the Prevention of Corruption Act (PCA) that do not distinguish between an erroneous decision and a corrupt decision, are hampering public-sector banks’ recovery of non-performing assets (NPAs) and their capacity to lend to the growing needs of the economy.

“I can tell you in settling the current lot of NPAs, it is this one problem alone which is creating challenges before the officials of various public-sector banks. Today, a private-sector bank has the liberty to settle its NPAs and officers of public-sector banks are constrained by the provisions of the 1988 Act,” Jaitley said in his address at an Accountants General conference, organised by the Comptroller and Auditor General of India (CAG).

Amendments to PCA that will distinguish this distinction is lying with a Parliamentary panel. Sources said the amendments would be tabled in Parliament in the winter session starting next month if the panel gives its report. PCA was enacted in 1988, three years before India’s economy was opened up.

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Jaitley said the time has come for a liberalised regime, which distinguishes between an erroneous decision and a corrupt decision to be put in place so that the civil servants and public-sector companies as well as banks could take important commercial decisions. “

I think this distinction needs to be finally stated. The corrupt decision must be punishable; the erroneous decision can only give you a post-facto analysis so that the system is wiser by that experience,” he said.

Jaitley said PCA’s existing provisions gives a lot of discretion to the investigating officer in deciding whether a particular gain accrued to a private party was fair or unfair.

“People transact with governments to earn money. Nobody consciously transact with governments to lose money. So, a gain in transaction is inevitable. Whether that gain is a fair gain or unfair gain, that distinction is to be determined. That puts a decision maker, particularly the civil servant, in a very difficult position in a large number of departments of the government and various public sectors,” said Jaitley.

The finance minister said if a decision has been taken by abuse of power, then post-facto audit has to come down harder. Secondly, if there were procedural irregularities and people have cut corners, then somebody must answer why has it been done as deviation from procedures can raise eye brows.
AT A GLANCE
  • Jaitley says with government, RBI empowering banks, stage is now set for the lenders to take effective action to recover NPAs
     
  • Sources said some cases have been referred to a two-member Overseeing Committee, set up to settle NPAs in prudent and transparent manner
     
  • Gross NPAs of public sector banks surged from 5.43 per cent (Rs 2.67 lakh crore) in 2014-15 to 9.32 per cent (Rs 4.76 lakh crore) in 2015-16

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First Published: Oct 22 2016 | 12:35 AM IST

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