Vinod Rai slams banks for inaction on bad loans

Moneycontrol Bureau

Banks Board Bureau chief Vinod Rai has blamed banks for the lack of progress in resolving bad loans, despite the central bank creating a conducive environment for banks to clean up their books. Rai said that the managements of banks are reluctant to take decisions on recasting debt in spite of the concerns that rising bad loans are holding back the country’s economy. 

The former Comptroller and Auditor General told The Economic Times that managements are apprehensive that they may be accused of favouring corporates and face corruption charges while resolving bad loans.

"We are not making much progress and I don’t think we have anybody else to blame but the banks themselves," Rai told The Economic Times.

Rai said in his interactions with the newly-appointed RBI Governor Urjit Patel, he was assured that central bank will be supportive. “I don’t think at any point of time before this, the government or RBI had made it so simple for them to settle. But the point is RBI is not going to lay out the entire red carpet and then say you settle," he told the newspaper. The newly-announced bankruptcy laws will be ineffective as long as banks are not prepared to make decisions on bad loans, Rai said, adding that BBB was only an advisory body.

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According to the report which quoted a Crisil note, gross NPAs of public sector banks increased to Rs 4.76 lakh crore in FY16 from Rs 2.67 lakh crore in the year before. As many as 13 of 21 public sector banks — State Bank of India and its associates were counted as one entity — posted losses in FY16 and half of them could do so again this fiscal, the report said.