Sinha move to clear bad loans of banks

By Our Special Correspondent

NEW DELHI, JUNE 13. In a move aimed at ridding public sector banks of Rs. 51,000 crores of bad loans, the Finance Minister, Mr. Yashwant Sinha, has announced a one-time settlement of outstanding loans below Rs. 10 crores. However, punitive action would be taken against leading defaulters and the list of defaulters publicised, something the Government has been shying away from so far.

The Reserve Bank has been asked to draw up non- discriminatory and non-discretionary guidelines by July 15 for the one-time scheme.

The outstanding loans of the public sector banks (non-performing assets in technical terms) stood at Rs. 51,667 crores as on March 31, 2000, though it had come down marginally from Rs. 51,710 crores at the end of March 1999.

Mr. Sinha authorised the bank chairmen to decide on the one-time settlement or a rehabilitation package for outstanding loans of Rs. 10 crores and above.

He set a September-end deadline for filing recovery suits and asked the chairmen to furnish within 30 days the list of defaulters, which would then be widely publicised.

Action would be initiated for recovery of non- performing assets from wilful defaulters. A deadline of six months has been set for all cases to be settled before the debt recovery tribunals.

These decisions were taken at a meeting here today of the Finance Minister with the chief executives of the public sector banks. Mr. Sinha asked the banks to restructure the education loan policy so that higher education was promoted through reasonable interest rates and not so stringent collaterals.

The Special Secretary (Banking) in the Finance Ministry, Mr. Devi Dayal, told presspersons that the need to accelerate priority sector lending was also discussed. It

was decided that bank officers be provided incentives for speedy approval of loans as well as recovery of debts.

Mr. Dayal said the RBI was being asked to come out with guidelines for recovery of non-performing assets since all bank chiefs felt the need for uniform and non-discriminatory guidelines applicable to all public sector banks. While formulating these guidelines, the RBI would also decide on the benchmark for interest waiver on bad loans.

It was also decided to set up a seven-member committee headed by the Chairman of the Indian Banks Association (IBA), Mr. S.S. Kohli, to look into human resource development in the sector, including the issue of voluntary retirement schemes.

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