It is an interesting coincidence that the government’s approval to a bill that will enable banks to use the money deposited by citizens to save a bank on the verge of collapse and the news that PSU banks have written off loans worth Rs 55,356 crore in six months have come out almost simultaneously. These items expose the bitter truth of the possibility of an organised loot of the depositors’ hard-earned money and this will hopefully not go unnoticed by the depositors’ organisations. Bank deposits are to be used for productive purposes and not to bail out defaulters. This decision comes close on the heels of demonetisation which former Prime Minister Manmohan Singh called “organised loot”.
When this latest permitted loot comes into force through the Resolution Corporation, it will surely be challenged in the courts but before that it is hoped that the government shows good sense and withdraws this bill. Most of the major defaulters are big corporates and it is a traversty of justice that the ordinary depositor should pay up for their defaults, even if they are genuine. There are hardly any cases wherein the properties of the defaulters have been taken over and moneys recovered through a quick sale of the same. In many cases the defaulters can afford to pay but don’t and this was pointed out by former RBI governor Raghuram Rajan who said these defaulters throw lavish parties and buy lavish yachts but don’t repay their loans. In the case of defaulters who are poor, particularly in rural areas, their cattle and utensils etc are taken over ruthlessly.
Additionally bank officials in charge of sanctioning loans are rarely taken to task even if they indulged in deliberate mismanagement. Many a times banks get calls from politicians to oblige their friends, and when these loans go bad it is unfair that the common man should be made to pay. Surely there are several other ways in which banks can be bailed out without picking the money in the bank accounts of trusting depositors. In India it is a well-known fact that a majority of people trust the government and prefer to put their money in nationalised banks rather than in risky assets like shares. If this bill goes through, it would be a criminal betrayal of the trust of the depositors.
The government has already infused nearly Rs one lakh crore of the peoples’ money in the banks over the last few years and has infused over Rs 25,000 crore this year as a first instalment.
There is a grave need for the government to take this issue of bad loans seriously and bring in reforms that could eliminate, to a large extent , the issue of loans going sour. Any solution should be through the use of some separate fund. If loans have gone bad because of a government decision for instance then the government should be made to pay for this and if it is the bank managers then they should be held accountable.
