Legal Measures for Recovering NPA

Cover Story:Legal Measures for Recovering NPA

Setting Roadmap for Banking Reforms

It is an open secret that the terminology of Non Performing assets is the worst enemy of the banking sector. It is a blatant fact that the government has failed to take any concrete measures against defaulters, who are moving in the society as highly prestigious persons.
The figures available at any end are not only alarming but shocking also. Bad loan figure is Rs.2.36 lacs crore. This figure has increased by 600% during last five years only. The data is available with both the government and Banks/RBI. Lack of political will has been a major obstacle. Government should mull over introducing a tougher recovery law regime with following provisions:

1. No bank shall be allowed to show incorrect figure of NPA.
2. The figure of NPA finalized by the RBI should take as final NPA figure. (and not declared by the bank)
3. The loan shall not be allowed for intentional reconstruction (this figure for PSB is surprisingly Rs.3.25 lac crore).
4. The RBI must publish list of such borrowers quarterly.
5. Such defaulters should not be allowed to hold any social, professional, political post. Effective legal provisions should be introduced to make them face social boycott;
6. This quantum of money mentioned above is nothing but transferring of national wealth into a personal wealth playing game with no liability of law and therefore recovery laws should be strengthened by following ways:

• Special courts should be established only for such recovery and should deal all such cases of recovery of debts of any legal entity established under any Act in the country, including that of cooperative banks and non-financial organizations;
• Let such defaulter's properties, assets be attached and the properties be taken and named as government property.
• Even after this recovery if the amount is still receivable then such persons should face criminal action, where the punishment should not be less than 14 years.
• High professionals (CAs with legal qualification or senior advocates) should only be allowed to deal such cases under the recovery laws.
• In any case the results of the case must come out within maximum six month from the date of the declaring the asset of NPA.
• The Board of Directors of the Bank should also make liable for appropriate punishment if they try to protect the defaulters by late declaration of NPA and should face the equally stringent criminal charges;
• The results of the court can only be challenged in the Hon'ble High court and then in Hon'ble Supreme court

Only by strong political will a country can ensure flow of money for growth and general welfare of the society.

-Prakash Gangadhar Pathak (The write is CA and working in banking sector as a consultant. He can be contacted at capgp@rediffmail.com)