MoS Finance Anurag Thakur said that banks should treat the Insolvency and Bankruptcy Code as the last resort for resolution of stressed assets and approach the NCLT only when other options have been explored.
Banks should feel free to take decisions in the interest of the country without the fear of being harassed by investigative agencies in future, Minister of State for Finance Anurag Thakur said on September 11.
Thakur was addressing senior banking officials at the annual general meeting of Indian Banks' Association in Mumbai.
"Be assured that the government is standing with the banking industry and that no decision taken in good faith will be treated adversely in the future by any agency. I want to assure you this, be free and take decisions in the interest of the bank and in the interest of the country," Thakur said.
He added that decisions taken in the normal course of business and taken in good faith with a sound business rational will not face any "witch hunt" in the future.
Over the past, many former banking officials were pulled up by investigative agencies for sanctioning loans that ended up as non-performing assets (NPAs) for various reasons including frauds committed by borrowers. Thakur's comments come at a time when banks, gripped by sense of risk aversion, are unwilling to lend to troubled sectors.
Last month, the Central Vigilance Commission (CVC) constituted a four-member committee to examine frauds over Rs 50 crore. Thakur said that the decision to refer cases to the committee remains with banks.
"The decision taken by the committee and the Chief Vigilance Officer will be treated as final. The bankers should also make certain that fraud must be timely reported without any fear of repercussion," he added.
Thakur said that banks also need to build a robust and secure infrastructure to ensure protection of data and interest of customers.
The Advisory Board for Banking Frauds (ABBF), under the chairmanship of former vigilance commissioner TM Bhasin, held its first meeting with the banking industry body on September 11.
Thakur also said that banks should treat the Insolvency and Bankruptcy Code as the last resort for resolution of stressed assets and approach the National Company Law Tribunal (NCLT) only when other options have been explored.
"My request to you will be to resolve stressed asset in the right earnest and refer cases to NCLT only if a satisfactory resolution outside the NCLT process is not available," he said.
In terms of overall asset quality of banks, Thakur said that banks have cleaned up their balance sheets and are in a better position to lend.
"I expect the remaining four public sector banks to come out of the PCA framework soon which will remove the lending restrictions they have currently.It has been seen in the past that the public sector banks which were present in the PCA framework have improved their financial parameters after they were recapitalized by the government," he said.He also urged banks to cut their lending rates further and improve the credit flow to industries for revival of investments and consumption cycle.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.