Why not a NPA security Bill?

Just the way we cannot banish hunger by banishing the hungry, NPA cannot be banished by putting the defaulters in jail. 

It is true that there are  some wilful defaulters and also some of them lacked financial discipline and ought not to have entered entrepreneurial adventures.  But it is wrong to say that all defaulters come in this category.

A large number of defaults have  occurred due to contributory negligence and in some cases of criminal attitude of the bank officials as well –of which we hear now and them in the press.  There are large number of cases where the accounts have become sick because of Government policies or lack of them.  In some cases the accounts have become defaults due to some turmoil in the sector like jewellery or petroleum based units, or sudden devaluation of the rupee, or perhaps their exports got stuck in dangerous political situation in the country of import.  There could be hundreds of such instances.

These entrepreneurs are certainly national assets and should be encouraged and nurtured.  They create jobs and generate taxes and revenues.  Without them India just cannot function.  These are the MSME units who are in danger of becoming extinct soon if not sooner.

The most common refrain amongst banking circles as well as in Government is that bank loan defaulters are national looters and they must be hounded to death.  The gravity of this thinking in Government circles is so extensive that then Finance Minister, just before demitting office to become the President of India, held a conference of  Chairpersons of  Debts Recovery Appellate Tribunals and Presiding Officers of Debts Recovery Tribunals and other such officials and ‘advised’  them to recover bank dues.  A committee is reported to be functioning in the Ministry of Finance which requires senior officers of Debts Recovery Appellate Tribunals and Debts Recovery Tribunal  to appear before them and report on the progress being made in recovery of bank dues.  It is also learnt that this committee is run by some senior officers of bank.  How can justice be expected if the Debts Recovery Appellate Tribunals and Debts Recovery Tribunal  are subject to such immense pressures.  After all they are also human beings.

This is the same attitude the Government adopted in tackling the Naxalite or Maoists.  But the problem of NPA is far more serious issue as it effects the nation as a whole and cannot be confined some remote an inaccessible jungles.

It is therefore absolutely necessary that the NPA be treated as an epidemic.  Debt  restructuring should be rolled out just as food security was rolled in. Without a healthy and vibrant MSME sector the economy is likely to collapse like it happened in some countries in the recent past.

We believe that unless the borrower is a wilful defaulter the banks must necessarily and compulsorily go in for restructuring of the account, whether or not the borrower is able to infuse fresh capital or bring in additional collateral.  After all the default is of just 90 days to categorize the account as NPA,  and the banks already have a margin money  of 25% brought in by the borrower and additionally a buffer of 25%  to 30% on the value of  collateral without taking into account the appreciation in the value of the assets

The banks must also accept the reports given by technical experts as to the viability of the project and not be the appellate authority and reject such reports of experts. 

BankDRT therefore feels that a new provision should be inserted in the SARFAESI Act which makes it mandatory for the banks to go in for Debts Restructuring Scheme (DRS) before issuing a notice u/s 13(2) of the SARFAESI Act. 

We invite readers comments and views on this topic.