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Finance Minister Nirmala Sitharaman emphasized on Friday that there has been “no leniency” in recovering bad loans from large defaulters, with the Enforcement Directorate (ED) attaching properties worth ₹64,920 crore from 1,105 such defaulters under investigation. Sitharaman’s remarks came amidst opposition claims of loan waivers for industrialists during the Modi government, which she refuted in a series of posts on X, the social media platform formerly known as Twitter.
“The Opposition, habituated to spreading lies, wrongly claims that there has been a ‘waiver’ of loans given to industrialists,” Sitharaman stated. She clarified the distinction between write-offs and waivers, stressing that after write-offs as per RBI guidelines, banks actively pursue the recovery of bad loans. “There has been no ‘waiver’ of loans for any industrialist. Between 2014 and 2023, banks recovered more than ₹10 lakh crore from bad loans,” she added.
The ED has investigated around 1,105 bank fraud cases, resulting in the attachment of proceeds of crime amounting to ₹64,920 crore. As of December 2023, assets worth ₹15,183 crore have been restituted to Public Sector Banks (PSBs).
Sitharaman highlighted the exploitation of the banking sector by the previous regime, which led to stress on the balance sheets of both banks and corporates due to imprudent lending and hidden non-performing assets (NPAs). “We’ve turned banks from being ‘NPA-laden nightmares’ into ‘Pillars of Jan Kalyan’. From having a ‘Twin Balance Sheet Problem’, we now have a ‘Twin Balance Sheet Advantage’,” she said.
The minister pointed out various measures taken by the current government and the RBI, such as the Asset Quality Review (AQR), which revealed hidden NPAs and ended the accounting tricks used to conceal them. Sitharaman attributed the creation of the ‘Twin Balance Sheet’ problem to reckless lending during the Congress-led United Progressive Alliance (UPA) regime.
Under the UPA, obtaining loans from banks often depended on powerful connections rather than solid business propositions, Sitharaman alleged. “Banks were forced to neglect proper due diligence and risk assessment before sanctioning these loans,” she said.
After banks began transparently disclosing their NPAs for loans lent before 2014, gross NPAs of PSBs rose to a high of 14.6% in 2017-18. Sitharaman cited former RBI governors Raghuram Rajan and Urjit Patel, who had criticized the UPA regime’s handling of NPAs and exposed the decay in the system.
In 2015, the Modi government prompted the RBI to launch a thorough AQR to stop the evergreening of bad loans, which caused gross NPAs to spike to ₹10,36,187 crore by March 2018. Before the AQR, the gross NPA was ₹2,16,739 crore as most NPAs were hidden in the banks’ balance sheets.
The government adopted a four ‘R’ strategy—recognition, resolution, recapitalization, and reforms—to restore banks’ health. Banks were recapitalized with ₹3.10 lakh crore, and the Insolvency and Bankruptcy Code (IBC) resolved loans worth over ₹3.36 lakh crore as of March 2024.
“Our reforms addressed credit discipline, recognition and resolution of stress, responsible lending, and improved governance. We replaced political interference in banks with professional integrity and independence,” Sitharaman said. The creation of the Banks Board Bureau (BBB) ensured a transparent selection of non-executive chairpersons and whole-time directors.
The government also issued a framework in 2015 for the timely detection and investigation of large-value bank frauds, enacted the Fugitive Economic Offenders Act of 2018 for the seizure of fugitive economic offenders’ property, and amended the SARFAESI Act for more effective recoveries. Over the last five years, banks have recovered ₹1.51 lakh crore through SARFAESI.
Additional measures to strengthen banks included doubling the pecuniary jurisdiction of debt recovery tribunals (DRTs) to ₹20 lakh, creating stressed asset management verticals by PSBs for stringent recovery, segregating monitoring roles from sanctioning roles in high-value loans, deploying specialized monitoring agencies for loans above ₹250 crore, and introducing online end-to-end one-time settlement (OTS) platforms for better realization of dues.
Sources By Agencies
