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

The Economic Times - - Pure Politics - Times­

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.”


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