Madam, a basic question which a large
number of Members have raised is with regard to NPAs and wilful
defaulters. Shri Premachandran said that wilful defaulters should be
prosecuted. If cases for prosecution under the Indian Penal Code are
made out, that is to say, if there is any kind of siphoning or diversion
of money and a person is declared as a wilful defaulter, then certainly there
are prosecutions in those cases. It is not that you
can be a wilful defaulter and get away with it. NPA
is slightly different. NPA is a case where people have taken loans for
the purposes of some activity, commercial or otherwise. There is
nothing per se against taking loans from banks. So, we must always
distinguish it from loans which are pending because banks giving loans is a
good thing. Banks support growth140 by giving loans.
Therefore, if loans stop coming, growth itself will stop. There is nothing
wrong with160 loans pending but loans will have to be
serviced. That is to say, you have to pay back the interest. You have to slowly
pay back the principal amount and when a person is not able to pay
back the interest after a certain period of time, say 90 days, the
account becomes an NPA. An asset is performing as long as it is servicing
the bank. The moment it stops servicing the banks, it becomes
non-performing. Now here the banks are faced with a Hobson’s choice. There
could be several reasons. One reason could be what Mr. Premachandran
mentioned that somebody has siphoned off money or diverted the money which is a
criminal offence. There may be other cases280 where
loans have been wrongly given. There are ethical questions in that. But
then there can be a third category also where loans were
rightly given, they were given to good units and for some reason the business
cycle has320 taken an adverse turn and that particular
industry gets adversely affected.
At that stage we are faced with a question:
do we paralyze the entire sector itself and result in losing thousands and
lakhs of jobs as far as that sector is concerned? Obviously, the State
cannot do it. The banks do not want to do it. That is not in larger public
interest. So, all efforts are then made in order to ensure that
these units continue to function because if they continue to function, then
workmen will get jobs, taxes will be paid, and there will420 be economic
activity in the interest of the country. So, the Reserve Bank
of India keeps coming out with various circulars which empower the
banks. You can have a Corporate Debt Restructuring. You can
have SDR where some part of the debt can be converted into equity. You can
bring in a strategic partner from outside and hand over the management480 to
somebody else. Then there is a JLF mechanism by which the lenders themselves
acquire a larger role and, therefore, each of these instruments are applied to
ensure that the units keep functioning, jobs are not lost and at the same
time the asset can also be preserved. For instance,
the largest loans today really are in four to five sectors. I have said this
earlier in this House also. The steel sector over the last few
years has been facing560 a stress and it is facing a
stress in a large number of countries. The reason was low global demand
because of the global slowdown and as a part of the low global demand, it
is believed that the Chinese steel was flooding these markets,
including the Indian market, at prices less than production cost. When cheaper
Chinese steel was coming into India, our steel mills were not being able
to work to the best of their capacity. Their demand became less,640 accompanied
by global factors and therefore, our steel companies went into red. A large
number of steel industries, even some of the largest blue-chip companies like
TISCO, SAIL, also faced challenges. Now, these are core sector industries and
we cannot afford to let anyone of them close down. Therefore, the best possible
option has to be made700 in order to keep these
sectors going.
One of the larger solutions was
that the Government of the day has a responsibility with regard to
policy as to how to revive that sector. So, the Government increased some
Customs Duty; tried some Duties on subsidies that the Chinese were giving. Finally,
what seems to have worked in the last few days was that for a
temporary period the Government had put a Minimum Import Price,
that no steel below a certain price can get into India. The United
States took a more aggressive action. They imposed various forms
of anti-dumping800 Duties and in
some cases the Duties went up to 280 per cent on the Chinese
steel. UK could not do it because the European Union did not do
it and that is why we had the problem with the840 Tata
Steel Plant in the United Kingdom. These are issues which
cannot be settled by securitization or by DRT. They would have
to be settled by policy itself. After steel come the infrastructure
projects. This was another sector where large debts were
pending, even still they are pending. The third important sector was power. In
power, the cancellation of the coal blocks was coupled with low demand for
power because of the global and the domestic demand being low and then another
factor came in, which I have mentioned earlier, that several
State Governments, through their State Electricity Boards decided to subsidize
power to certain segments of the society – some in case of
farms, some in case of domestic, some in960 case of
industrial sector. Now, under the Electricity Act of 2003, subsidy has to be
paid by the State Government980 from its own Budget to
the electricity companies, if they want it. They did not do
that. Instead, they just allowed the Distribution Companies to take loans from
banks. So, literally, when these figures of six lakhs and eight lakhs were
being mentioned, a very large part of this money is owed by the DISCOMs to the
banks. The DISCOMs are neither paying back the principal amount, nor the
interest. So, again the Government has stepped in. The Ministry
of Power came out with UDAY Scheme by which the State Governments must
take over the debt, issue bonds so that the debt of the power companies is
reduced and then slowly, the power companies, over a period of time,
increase their tariff so that they charge for the power that they
supply. So, the power sector1120 could be
revised.
Sectors like national highways,
sugar and some other sectors were sick and some of them have recently shown
signs of revival. So, the real answer is, as far as the big
loans are concerned, the economic cycle itself will have to take care
of a large number of them. At the same time, people are not able
to service it. The banks are today putting a lot of pressure on them. We
must be reading about a group with five or six units having being compelled to
sell two of them so as to repay back the banks. So, they are coming out with
solutions under the RBI circulars of this kind. The third methodology
is, banks must also be empowered to take effective legal action against
the defaulters. One of them was the insolvency law1260 or
the bankruptcy law where a company is turning bankrupt and is unable to
discharge its debts. Rather than the1280 debts
being squandered away and getting rusted, somebody has to step
in and take over the asset so that if a revival is possible, the
revival will take place and if it is not possible, then the assets
could be adequately distributed. From workmen downwards, everybody
gets his own share as far as debts are concerned. The two principal laws,
Securitization and DRT, are also steps in that direction. As far as DRT law is
concerned, we have suggested not more than two adjournments. The
whole system is now intended to become electronic. You file your cases
electronically; the replies are electronic; you try and dispose of
matters as quickly as possible; judgments cannot be reserved for
more than 30 days;1400 recovery certificates must be
expeditiously issued.
One of the difficulties we were also having is
in finding good presiding officers of both DRTs and Appellate Tribunals. So,
the age has also been relaxed a little in the present amendments. The1440 second
part of the amendment is with regard to the SARFAESI law wherein the bank
is empowered to take over the asset which is the security and
once you take over the security, the debtor will start chasing the bank
and come out with some sort of settlement. So, the security can at least be
protected. The security can be given to the Asset Reconstruction Company and
that the Asset Reconstruction Company will then transiently hold it till a
new person can step in and then revive the same asset. The idea is that the
unit must go on1540 and it must economically become more
liquid and the jobs are not lost in the whole process. Several honourable Members have raised various questions. One of the questions which Shri
Premachandran had again mentioned was with regard to agricultural land. The
answer is, farmers’ agricultural land is exempted from securitization under
Section 31(i) of the Act itself. That is a1600 question
which remains outside the Securitization Act.
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