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In a step to help public sector banks to recover bad loans, the Finance Ministry has asked the I-T Department to share details of defaulters' wealth tax returns with PSBs if they ask for such information.
The Ministry said in a communication to Commissioners of Income Tax said "CBDT ... Clarifies that information on assets of loan defaulters to enable recovery of loans by PSBs from such defaulters is in public interest".
The top 30 non-performing assets (NPAs) of state-owned banks account for 40.2% of their gross bad loans.
According to available data, NPAs of state-owned banks rose 28.5% to Rs 2.36 lakh crore in September last year from Rs 1.83 lakh crore in March, 2013. It is expected to have grown further.
Reserve Bank Governor Raghuram Rajan had recently expressed concerns over the bad loans in banks.
"With rising NPAs, this comes as a welcome step to protect the public money.... Clearly recovery of PSB loans in in public interst," said Amit Maheshwari, Partner of CA firm Ashok Maheshwary and Associaties.
The directions were issued in view of reluctance of the Income Tax Department, which comes under the Central Board of Direct Taxes (CBDT), to share information provided in wealth tax returns with the banks despite repeated requests.
The information will help banks in recovering bad loans by sale of immovable and movable asset of loan defaulters.
However, the Finance Ministry said banks will be allowed to recover their dues from sale of assets of defaulters only after settlement of the claims of the tax department.
"In order to ensure that tax dues of the Department against the defaulter (if any) are safeguarded, an undertaking be obtained from the PSB to obtain an NOC from jurisdictional CIT of the loan defaulter before appropriation of the surplus amount recovered from sale of immovable/movable asset of the defaulter, information in respect of which is shared, after adjustment of its loan dues," it said.
The Finance Ministry further said the information provided by the Income Tax Department to banks should only be used for recovery of loans and should not be shared with any other agency.
