New Delhi: Congress on Wednesday slammed the Centre after the Reserve Bank of India (RBI) brought in a policy that allows banks and finance companies to settle loans of accounts classified as “wilful defaulters” by entering into compromise settlements or technically writing off the loans, and asked why it has changed its own rules with regards to frauds.
In a tweet, Congress General secretary Jairam Ramesh said, “The RBI must clarify why it has changed its own rules with regards to wilful defaulters’ and afrauds’. This despite the All India Bank Officers’ Confederation and the All India Bank Employees Association clearly stating this move would “erode public trust in the banking sector, undermine the confidence of depositors, perpetuate a culture of non-compliance and leave banks and their employees bearing the brunt of the losses.”
In his statement, Ramesh, who is a Rajya Sabha MP said, “The Prime Minister (Narendra Modi) has always eagerly bent or changed rules to help his friends in a few large business groups.”
“The latest example is a clean chit to all wilful defaulters and frauds who have run away with public money. On 8 June 2023, the RBI issued instructions under a “Framework for Compromise Settlements and Technical Write-offs” that allowed banks and other financial entities to “undertake compromise settlements or technical write-offs in respect of accounts categorised as wilful defaulters or fraud without prejudice to the criminal proceeding underway against such debtors.” These accounts will be permitted to take fresh loans after a 12-month “cooling period”,” he said.
He also cited that the All India Bank Officers’ Confederation and the All India Bank Employees Association, that represent 6 lakh bank employees, have both opposed this policy.
“They point out that ‘it will not only lead to erosion of public trust in the banking sector but also undermine the confidence of depositors’. They warn that ‘such leniency serves to perpetuate a culture of non-compliance and moral hazard, leaving banks and their employees bearing the brunt of the losses'”, Ramesh said.
The Congress leader said that the RBI knows well the dangers of its move.
“Two years ago, it had clearly stated that wilful defaulters would not be allowed to access capital markets or take fresh loans. As recently as May 29, 2023, the RBI governor warned about the many ways in which defaulters and fraudsters conceal the true status of distressed loans. Will the RBI clarify if the Modi government has pressurised it to take this U-turn,” he questioned.
He said that Indians have paid a high price for fraud and wilful defaults.
He also highlighted that banks wrote off loans worth 10 lakh crore between 2017-18 and 2021-22 while the recovery rate for these loans is an abysmal 13 per cent, which means that only 1 is being recovered out of every 8 written off.
“The top 50 wilful defaulters, a list headed by PM Modi’s friend Mehul Choksi, owe a substantial Rs 92,570 crore (as on 31 March 2022). Banking frauds have risen 17-fold under the Modi government, from Rs 34,993 crore in 2005-14 to Rs 5.89 lakh crore in 2015-23,” he said.
Ramesh further said that honest borrowers-farmers, small and medium enterprises, and middle-class salaried workers – are groaning under relentless EMIs.
“They are never given a chance to renegotiate their loans. Yet the Modi government has now provided fraudsters and wilful defaulters such as Nirav Modi, Mehul Choksi and Vijay Mallya a path to rehabilitation. While wealthy financiers of the BJP are given every undeserved convenience, honest Indians struggle to pay their loans. This reveals the true nature of this suit-boot-loot-jhoot sarkar,” he added.
(IANS)
