DICTATION EXERCISE - 24

Hon. Chairperson, Sir, the Modi Sarkar itself has accepted that demonetization has had a severe negative economic impact because in the list of achievements mentioned in the Economic Survey released on the 31st January by the Chief Economic Adviser, they have mentioned Aadhar, GST, FDI, UPI, but there is no mention of demonetization. In fact, Aadhar, GST, and FDI are all Congress initiated programmes. So, I want to accept the Prime Minister’s invitation this morning that we will happily take credit for the few good achievements of this Government. The Modi Sarkar also accepts – and I am quoting from Chapter III of The Economic Survey – that demonetization resulted in slowing growth; demonetization reduced demand, cash, and private wealth; it reduced supply, liquidity and working capital, disrupted supply chain, increased uncertainty – and I am still quoting – job losses; decline in farm¹⁴⁰ income; social disruption, especially in cash incentive sectors. So, I would commend to the Finance Minister Chapter III of his¹⁶⁰ Economic Survey as my indictment of his Government.

The Prime Minister has been talking about the surgical strike on black money, corruption, terrorism, and counterfeiting but it is very clear that these objectives have not been met. A surgical strike is always precisely targeted but here the collateral damage is so extreme that the pain inflicted has outweighed any tangible gain. But what was the gain? Let us take black money for example. The estimate was that many people – rather than attract the attention of the law enforcement authorities and the tax authorities – would not return their money but would destroy their black money. Various agencies estimated that around 25 per cent to 30 per cent of the specified bank²⁸⁰ notes would not be deposited by the stipulated date. On November 23rd, the Attorney General of India told the Supreme Court that the Government expected that SBN worth Rs. 4 lakh crore to Rs. 5 lakh crore would be rendered³²⁰ worthless on account of not being deposited but what happened? It seems that our black money hoarders have found creative ways of laundering their money and the result is that most of the estimated black money in circulation – these Rs. 4 lakh crore to Rs. 5 lakh crore – that the Attorney-General mentioned has flooded into the banks.

It seems that some well placed friends of the Ruling Party may well have been allegedly tipped off because the well-connected were clearly able to unload their money; none of them seemed terribly troubled by the November 8th announcement. We do not know,⁴²⁰ of course, how much has come in because the Reserve Bank has not given official figures but it has been widely reported that by the end of December, 95 per cent to 97 per cent of the money in circulation has already reached the banking system. If that is so, after leaving out the small amount being held by the⁴⁸⁰ Central Banks of Nepal and Bhutan and by NRIs, it looks like utmost you would have two per cent or three per cent of all the demonetized specified bank notes undeposited. We cannot forget the primary objective of cleansing the economy. In fact, the RBI Governor has himself conceded that there is no impact at all of demonetization on the RBI’s balance-sheet and there may be no liability write-off at all. The Bill’s purpose is to extinguish the liabilities of⁵⁶⁰ the RBI but none have been reduced. As we all know, all cash is not black money and all black money is not cash; most of it has been invested in real estate and other property, gold and jewellery, investments abroad, and round-tripping that has seen the money return to India’s stock market as foreign investment from countries like Mauritius.

The Prime Minister, this morning asked, ‘Yes, that is true but when did you know it?’ Let me say that⁶⁴⁰ we have always known it. This Party and the UPA Government have openly said it. I have myself said that in two different black money debates in this very House in the last six years. So, the fact is that the Government should also have known it. So, why did they make a scheme that only touches such a small⁷⁰⁰ proportion of the black money assets that those people are holding? Worse, in the six weeks after demonetisation, the Income Tax Department announced that it had seized Rs. 500 crore in unaccounted cash. Strikingly, Rs. 92 crore of that black money happened to be in new notes! So, what is going on? We are finding cases of corrupt officials including bank managers being caught red-handed in illegal transactions. Some bank managers were sitting in their banks from nine a.m. to five p.m., telling people they had no money; but from five p.m. to 9 p.m., they were giving money out⁸⁰⁰ of the back door, to those who could launder it. I want to say that though I am by no means tarnishing all the bank managers for the sins of a few, the fact is Mr. Finance Minister, that in⁸⁴⁰ your drive against corruption, you have created new forms of corruption. Black money continues to be generated clearly; it has merely changed colour and shape. Black money has become white by way of pink and of course Rs. 2,000 notes will take up less space in the launderer’s brief-case than the Rs. 1,000 notes did. We all know that we can withdraw notes, we have withdrawn in the past series of notes saying that those before 2005 were made illegal in 2014. You do not need to demonetize for such an exercise. You print new notes and phase out the old. If you are going to print new notes then you have to have strong security features enmeshed with the⁹⁶⁰ design in order to prevent counterfeiting. But it seems the Government has missed the opportunity to put incredible security features⁹⁸⁰ in the new notes it has launched post-demonetization because there is no new water mark, no new security thread or fibre, no new latent image and certainly no nano-chip as BJP supporters were boasting on Whatsapp. So, will a mere change of colour and size make them safe? Shockingly, RBI has admitted that three different versions of the 500 rupee note had been printed in haste. If all the three versions are authentic, is that not going to confuse the public and make it easier for counterfeiters to get away with their own fake versions?

Mr. Chairman, how big a problem is this counterfeiting? The Prime Minister mentioned it on November 8 but if you look at the statistical facts of the Indian Statistical Institute, Kolkata under the supervision of the Government’s own National Investigation Agency, the estimate of fake¹¹²⁰ currency notes in circulation is only 400 crores or roughly 0.03 per cent of the currency withdrawn. It also indicated that the ability of banks to prevent these notes being deposited was limited because of sudden deadlines, sudden announcements, short deadline, lots of money flooding in, they could not tell us how to do it manually. They did not have the time. So, the result, it seems according to anecdote anyway, is that there has been a lot of fake currency slipping through into the banking system and becoming legitimized. So, far from hurting counterfeiters, demonetization may have helped fake currency by being exchanged for new notes. That is the consequence on counterfeit. The study shows that there is no cause or relationship between the number of terrorist strikes on Indian soil and the absolute levels of currency in circulation.¹²⁶⁰ In any case, we all are seeing reports about terrorists being caught, arrested or shot in Kashmir possessing brand new¹²⁸⁰ currency notes. So, how the terrorists are being affected? Instead, who has the Government hit? Housewives, who have salted away their savings in biscuit or atta tins, are the ones whose money had to come out and put in the bank when even their husbands necessarily did not know how much they have saved.

Stories of individual tragedies have been mentioned in this House; hospitals turning away patients who only had old notes, children suffering, middle-class wage earners unable to buy medicines for the sick. Sir, 115 people reportedly dying after collapsing in bank queues, committing suicides, hitting each other, murdering each other are the demonetization-related events. There is even a report in one of today’s newspapers that demonetization has¹⁴⁰⁰ led to an increase in domestic violence cases. So, the people at the bottom of the economic pyramid have been the real victims of this policy. I do want to say, Mr. Chairman, we have been restricting weddings in the wedding¹⁴⁴⁰ season to Rs.2.5 lakh each but it seems if you were a BJP leader you have no difficulty in celebrating a lavish wedding even after demonetization. The goal posts have been shifting. Reserve Bank has issued 138 notifications in the first 70 days. Then I stopped counting. Even the Reserve Bank employees and officers have complained about operational mismanagement which has dented the RBI’s autonomy and reputation beyond repair. The Governor of the RBI has been reduced to a lamb and he is so silent. It is the silence of the lambs.

I just want to stress finally,¹⁵⁴⁰ Mr. Chairman, that we are getting new objectives. The Finance Minister talks about expanding the tax net but look at the cost at which this tax net is going to be expanded. The Prime Minister talked about cashless economy; no cash in the banks, no cash in the ATMs, no cash with the people. That is the kind of cashless economy we have.¹⁶⁰⁰

DICTATION EXERCISE - 19

Madam Speaker, I thank you very much. The proposed Amendment Bill is mainly intended to amend two Acts, that is, the SARFAESI Act of 2002 and the DRT Act 1993 along with two other Acts – the Stamp Act as well as the Depositories Act of 1996. The main objective of the proposed Bill is to improve the ease of doing business so as to facilitate investment leading to higher economic growth and development in our country. I fully support the Government as far as the intention of the Bill is concerned, that is, NPA which is accumulating like anything in the country has to be checked in a strict manner. That is the need of the hour. I fully agree with that position. The intention of the Bill is to address the issue of the stressed assets. Most of the hon. Members¹⁴⁰ have already pointed out about the present situation in our country regarding the stressed assets. The present situation¹⁶⁰ is that we have Rs. 8 lakh crore of stressed assets. That means, 5.6 per cent of the Indian GDP is the stressed asset. It is an alarming fiscal situation in our country. The latest forecast shows that the stressed assets of Indian banks would grow 11 per cent to 12 per cent in the financial year 2016-17. According to the Reserve Bank of India, 10.9 per cent of all loans are stressed. It would cross Rs.8 lakh crore by March. The public sector banks have already written off Rs.1.14 lakh crore as bad debts or debts which are not recoverable. 

The question which I would like to pose before the hon. Finance Minister is as to who are the²⁸⁰ real defaulters contributing to these huge non-performing assets in our country. Kindly see that bad loans in the banks are increasing day by day. The statistics which we have taken from the Library shows that as on 31st March, 2002, the³²⁰ gross NPAs in terms of rupees in public sector banks alone is Rs.54,673 crore. When we come to 2016, it has come to Rs.5,39,995 crore as NPAs of the public sector banks alone. That means, there has been a ten times increase within a span of 14 years. It means, we are not able to check NPAs. This is in respect of the public sector banks alone. If we calculate this in terms of private banks, it will approximately cross Rs. 10 lakh crore. So, where is the country going with this non-performing asset? Why is this?⁴²⁰ Who is to answer for this? The hon. Finance Minister recently stated that there are 7,000 wilful defaulters. That will come around Rs.76,000 crore as the amount of wilful defaulters. Wilful defaulters and other defaulters are entirely different. Out of the 7000 wilful defaulters, 5,601 wilful defaulters are from the public sector banks. That will come around Rs.58,000 crore. Here lies the⁴⁸⁰ main question. My question to the hon. Minister is that wilful defaulters should be treated as criminal offenders. It is because they are cheating the country. They are having the money but they are not paying it. ‘Wilful default’ means defrauding the bank, misusing the money, abusing the loan and diverting the money. These kinds of transactions are called as ‘wilful default’. My point is that instead of considering it as a civil liability or a civil dispute, wilful defaulter⁵⁶⁰ should be treated as criminal offenders and it should be treated as a criminal offence. That is the first point which I would like to make regarding this Bill.

Coming to the Act, the point that has been made is that there are two Acts that is, the SARFAESI Act as well as the DRT Act of 1993. Both these Acts have already been discussed. The point is that even after the legislation of these two Acts we are not⁶⁴⁰ able to check the increase in non-performing assets and we are not able to recover bad loans so far.  I now come to the statistics of the performance of Debts Recovery Tribunals and Debts Recovery Appellate Tribunals. You may kindly see the percentage of realisation of amounts through DRT. In the year 2010-11 the money which was recovered compared to⁷⁰⁰ the number of cases referred and the amount of rupees in bad debts was 27 per cent; in 2011-12 it was 17 per cent; in 2012-13 it was 14 per cent; in 2013-14 it was 10 per cent; and in 2014-15 it was 14 per cent. That means, recovery of bad loans through the Debts Recovery Tribunals is declining. Statistics of realisation of loans through DRTs is not satisfactory. The functioning of DRTs and DRATs have to be reviewed. That is the request I would like to make before the hon. Minister. Madam, by virtue of the 993 Act,⁸⁰⁰ the banks and financial institutions are having the easiest remedy to recover their loans. However, there are more than 10 lakh cases that have already been transferred to DRTs and Appeals Commission. What was the provision? Actually the time for⁸⁴⁰ disposal of cases before the DRT should be a maximum of 180 days. However, now years are being taken to dispose of the cases.

The amendment seeks expeditious disposal of recovery applications and electronic filing of applications. All these things are there. The point which I would like to highlight is that legislations are not sufficient to meet the situation. The hon. Finance Minister with his legal background is pushing through many legislations so as to have fiscal reforms in our country. But unfortunately the results as far as recovery of loans and checking of NPAs are not up to the mark. Mere legislations and new mechanisms enunciated out of legislations are not sufficient. The Government should have the will power,⁹⁶⁰ especially political will, to control and check NPAs, especially those created by the rich and the corporate entities.⁹⁸⁰ It is the poor students who are being punished. The SARFAESI Act is being implemented not against the rich people. It is being applied against farmers, students, MSME loans, housing loans etc. The SARFAESI Act as well as the DRT Act have to be implemented in a stringent manner. They should be applied against the rich and the corporate entities. I would like to know from the hon. Minister whether a list of wilful defaulters will be published and whether he will have the will power to control and check corruption as also contain NPAs by addressing them.

This amendment Bill is very important considering the grim situation of the banking sector in the country today. The gross bad loans of commercial banks increased to 8.5 per cent of total advances by March 2017 from 7.6 per cent in March 2016 according¹¹²⁰ to the Reserve Bank of India’s Financial Stability Report released recently. The gross bad loans of public sector banks increased to 9.6 per cent as of March 2016 from about six per cent a year earlier. The gross non-performing assets to total advances of public sector banks as on 31.03.2016 was Rs. 4,76,816 crore that is 9.32 per cent. The All India Bank Employees Association has announced the names of 5,600 wilful defaulters who collectively owe public and private sector banks over Rs. 58,790 crore as on March 2016. The State Bank of India was defrauded by more than 1,030 borrowers totalling Rs. 12,091 crore. The higher rate of NPAs has weakened the profitability and liquidity position of the banks, necessitating the recent recapitalisation of public sector banks to the tune of Rs 22,915 crore. It is the public funds¹²⁶⁰ or the taxpayers’ money being provided year after year to the ailing banks without any commendable changes in the governance¹²⁸⁰ of these banks. The Reserve Bank of India has taken some measures since January 2014 after Shri Raghuram Rajan became the Governor of RBI for recovery of bad loans, like restructuring bad debts, boosting the Asset Reconstruction Companies etc. But these measures have not served their intended purposes. In such a situation, I hope the present Bill will help in expeditious recovery of bad loans and strengthen the ailing public sector banks and financial institutions in the country.

The letting of loans and their recovery are equally important. This Amendment is mainly for enabling the system of recovery of loans, especially of bad debts. Unfortunately for letting of loans, our State-run banks are more eager to give loans to the corporate companies;¹⁴⁰⁰ and they are not much eager to recover bad debts from the corporate companies. On the other hand, the banks are not that much eager to advance loans to the poorer sections especially, educational loans, MSME loans and farm loans.¹⁴⁴⁰ At the same time, they are very much interested in recovering these loans even by foreclosing the loans advanced to students, farmers and others. This is unfortunate. Coming to the Bill, the Amendment to the SARFAESI Act, 2002 and the DRT Act, 1993, in the SARFAESI Act, more thrust is given to asset reconstruction companies. The practice is in place but the system is being misused. In educational loans, as we are aware, the State Bank of India has sold its loans to Reliance which is an asset reconstruction company and Reliance is taking steps to recover loans from poor¹⁵⁴⁰ students who are not in a position to find employment after their education. This is happening in my constituency too. The people are coming to us and complaining about atrocities meted out by these asset reconstruction companies.¹⁵⁷⁷

Dictation Exercise - 12

Mr. Chairman, Sir, all the important points have clearly been mentioned here by the hon. Members. At this juncture, I would like to link the monetary policy with demonetization. Even though I am not an expert on banking matters, with my limited knowledge I view the subject matter in this way. As I understand, the monetary policy document, which has already been circulated to us well ahead this time, makes two things very clear. One is that the objective of the monetary policy will be to target inflation within a band of two to six per cent, and secondly, effective monetary policy transmission is a prerequisite for the monetary policy to achieve its objective. One of the challenges with effective transmission has been that the banking system operates in a liquidity-deficit mode which the RBI intends to shift to a ⁽¹⁴⁰⁾ liquidity-neutral mode. One of the factors behind this persistent liquidity deficit has been the surge in cash usage in ⁽¹⁶⁰⁾ this country in the economy even while deposit growth has been subdued. Actually, this concern has been flagged off by the previous RBI Governor and also the SBI Chairman, Shrimati Bhattacharya. Thus, growth in cash usage can be a serious impediment to fulfilment of RBI’s monetary policy objective.

About the legality of the Government action, let me give my strain of thought on that. The growth in cash usage could well have been a concern of the Central Board of the RBI in its recommendation to the Government to declare Rs.500 and Rs.1000 notes to be no longer legal tender. The Government acted in accordance with section 26(2). All the hon. Members have already made this idea clear.⁽²⁸⁰⁾ Section 26(2) of the RBI Act states, “On recommendation of the Central Board, the Central Government may, by notification in the Gazette of India, declare that with effect from such date as may be specified in the notification, any series of bank ⁽³²⁰⁾ notes of any denomination shall cease to be legal tender.” As for the question of whether recommendation of the Central Board itself followed any advice of the Government, Section 7(1) of the Act states, “The Central Government may, from time to time, give such directions to the Bank, as it may after consultation with the Governor of the Bank, consider necessary in the public interest.” I conclude those viewpoints after reviewing of the monetary policy document. So, the above analysis brought out by me suggests that the RBI Act envisages a process of two-way consultation between the Government and ⁽⁴²⁰⁾ RBI without any one party unilaterally instructing the other. Thus, the Government may have been persuaded by its own concerns of black money, counterfeit notes, terror funding, corruption etc., give directions to the bank on demonetization as per Section 7 and the RBI may have weighed its own concerns like challenges to monetary policy transmission in its recommendation to the ⁽⁴⁸⁰⁾ Government on demonetization as per Section 26, following which the Government made that declaration again as per Section 26. I think this is the background of the whole thing which has resulted in the policy decisions on demonetization and after that digitization also has become a factor to be reconciled with. We have all heard about what has been happening after this. My question to the respected RBI Governor is, what is the action mooted by the RBI(560) to track the black money that had sneaked back into the financial system? There have been several reports on that. I do not know whether I can ask this question. What are the improved security features of the new currency notes to prevent counterfeiting? If it does not violate the security reasons, you need not divulge this information. If it does not, we would like to know about it.

Digital India is our dream; it is the dream of the people. ⁽⁶⁴⁰⁾ For instance, in a small country like Kenya, about 90 per cent of the youth are using e-currency systems. Several countries are using this. In a great country like India with all its potential of IT industry, we should make use of digital systems here also. ⁽⁷⁰⁰⁾ We all know about certain things which have already been conveyed very clearly, like shadow economy or parallel economy that has prevailed. How far is the RBI able to control that shadow economy which has been eating the vitals of the economy of the country so far? Tax evasion is universal in India. How far has the tax evasion been curbed by the process which has been mooted by the RBI? We all know that transparency in financial transactions is a myth in India. How far has this new digitization process helped in exposing corrupt transparency in all financial transactions in the country? Of course, we all know that this is a bitter brew. ⁽⁸⁰⁰⁾ Hon. Prime Minister himself told this to the country that after a waiting period of 50 days there would be good results. So, it is a bitter brew but it will be sweet soon. It is becoming already sweeter. People have ⁽⁸⁴⁰⁾ adjusted to this. I salute my countrymen for their resilience and for taking it in their stride and seeing that something good is happening in the country for the first time. I would like to put a few more questions to the RBI Governor. Everybody has got apprehensions about the issue of the needs of rural people being addressed. How far have those needs been taken into consideration? Banking connectivity in the rural areas is quite poor, as all of us understand. India Post is functioning under the Banking Act and the network of India Post should have been made use of by the RBI to ensure better connectivity and better facility for financial inclusion of the rural people. ⁽⁹⁶⁰⁾  This could have been facilitated by using about 136 lakhs post offices working in this country.  It is a huge ⁽⁹⁸⁰⁾ facility which could have been put to use in such a time when there was financial crunch in the beginning. The BhIM app has been designed by the Government of India and RBI has played a key role in that.  I congratulate them for that.  It will become a universal application of India.  We will not have to pay commission to America by way of Visa Card usage or to China by using PayTM or to some other country.   India has already designed the RuPay Card and now there is BhIM app.  How far has the RBI been successful in promoting BhIM app not only to the urban people but also to the rural people in this country?  It could also be a good remedial step.        

I feel that somewhere something is happening and that could be a phenomenon.  From media reports, ⁽¹¹²⁰⁾ I find that somebody is trying to sabotage the good intentions of the Government of India, especially some banks.  I read some reports that some kind of sabotage or some hand is working behind this.  For instance, some unwholesome activities are taking place between the banks.  I found that rich men got a lot of new currency of the denomination of Rs. 2000 in their hands.  How is it possible?  It means there are some lacunae somewhere.  That has to be looked into by the Reserve Bank of India.  I would say that the people in the country at large believe that demonetization is the right tool to end corruption, black money and fake notes and the first step in a far-reaching transformation in the functioning of our economy, bureaucracy, and of course, political parties also.⁽¹²⁶⁰⁾ So, this is a brave decision taken by the hon. Prime Minister.  We will have to support it heart and soul.⁽¹²⁸⁰⁾ As mentioned by the hon. Members here and as mentioned in media reports also, all of sudden there was a big infusion of deposits in Cooperative Banks.  Deposits to the tune of six-fold took place in Cooperative Banks all over the country in four days after the note ban was announced.  This is something fishy.  The Reserve Bank of India must deeply examine what went wrong and how it happened in Cooperative Banks which are people’s banks.  I am sure somewhere some mischief has been played by somebody.  Even the Chief Justice of the Supreme Court had a doubt over the whole system but the people of India did not have any doubt at all.        

Finally, some people also mentioned in media ⁽¹⁴⁰⁰⁾ that counterfeit notes circulated by Pakistan are not an issue at all.  But I dare say that it is a big issue.  Pakistan has made use  of  fake notes  to destabilize  the Indian  economy.   There  are proofs of it because ⁽¹⁴⁴⁰⁾ I am also a Member of the Committee on External Affairs.   The country’s economy was undergoing a devastating effect caused by fake notes brought by terrorists.  So, there is a background material linking monetary policy with demonetization brought out by the Government of India.  Let us go by this good decision of the Government and let us follow in the right stride and see that India becomes a strong economy.  The whole world is looking at India; the whole world is curious about how things are happening in this country.  Let us see that RBI’s hands are strengthened to see that everything goes very well in this process. ⁽¹⁵⁴⁸⁾

To access this dictation exercise on YouTube, please follow the links given below:

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https://www.youtube.com/watch?v=E9_Obx_P9qs&t=326s