PAC Asks Indian Bank, IOB to Explain Bad Debts
Parliamentary panel asks CEOs to appear before it on Feb 27; heads of more state-run banks likely to get call
New Delhi: The Public Accounts Committee (PAC) of Parliament has asked the chief executive officers of the Indian Overseas Bank and Indian Bank to appear before it to explain details of bad debts, better known as non-performing assets, of the banks and reasons for their non-recovery. The two CEOs have been asked to appear before the next PAC meeting scheduled for February 27 in Chennai, the city where the two banks have their headquarters, according to person privy to the information.
This will be the beginning of a series of such interactions the PAC, chaired by KV Thomas, plans to have with CEOs of public sector banks and other stake-holders on bad debts. They are follow-up actions of the PAC after its recent meeting with senior officials of the finance ministry on NPAs of various banks and its fallout on economy. During the meeting with finance ministry officials, the parliamentary body had asked it to provide names of top loan defaulters of PSU banks.
The PAC is learnt to have already dispatched a questioner to both the CEOs on various aspects of their banks’ bad debts and details of major defaulters. Among the queries, sources said, are details of the latest quantum of the bad debt the banks have, the reasons and steps taken, if any, for recovery and major factors delaying the recovery. “While banks are very strict in following the legal and administrative steps for loan-recovery vis-à-vis ordinary customers when they default, we would like to know whether or not similar steps are being diligently followed when it comes to major defaulters,” said a PAC member.
Maintaining that the overwhelming share of bad debts of banks stood against corporates and the most-cited reason of securing those loans have been “for building infrastructure projects”, the member said PAC will seek explanations from the CEOs whether professional due diligence was done about financial viability of the infrastructure projects before huge loans were sanctioned. Since most common reason cited for non-payment of debts was ‘failure’ of infrastructure projects to take off, the PAC is keen on knowing from the CEOs whether it indeed was the correct reason, or whether the loans were “clandestinely diverted or syphoned off.”