While submitting the list of loan defaulters in a sealed cover to the Supreme Court, the Reserve Bank of India (RBI) requested it to not disclose the names on the list as doing so could jeopardise businesses and even accentuate failure.
The RBI's apprehension that the livelihood of many employees would be affected if the names are revealed is genuine. However, a disclosure would prompt employees to search for better jobs elsewhere instead of facing hardships suddenly due to the loss of their current jobs.
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Non-performing assets are the fallout of loans given to industrialists without adequate collateral security. Loans given to the needy should not exceed the total cost of assets owned by them. Banks should be in a position to recover loans at least by auctioning the properties of defaulters.
On February 16, the Supreme Court observed that state-owned banks and financial institutions were providing loans without proper guidelines and without an adequate mechanism to recover the amounts. But the RBI in its affidavit said the defaults were due to delays in getting permissions from government and regulatory agencies, in acquisition of land and in sanction of loans. All this rendered the borrowers unable to use the money in time leading to poor credit appraisal and monitoring, lack of business management knowledge, an unanticipated business cycle downturn, a commodity cycle downturn and poor project execution. The government should address these problems to check the growing number of defaulters.
On the other hand, borrowers should not make use of the loans for purposes other than for which they were sanctioned. An honest borrower should return the money, perhaps without interest. If the borrower is not at fault, state-owned banks and financial institutions should accept the money without charging any interest.
It's time to do away with cumbersome procedures of sanctioning loans. Advocate Prashant Bhushan has disclosed that Rs 40,000 crore of corporate debt was written off in 2015. This means that defaulters benefited from taxpayers' money. Ordinary people should be liberated from bad loan policies and bureaucratic delays in sanctioning loans.
K V Seetharamaiah, Hassan
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