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Tuesday, September 12, 2000

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RBI'S NPA policy

Shika Sarma, Chennai

The recent RBI announcement on the settlement of bank NPAs is nothing but handing over the unsuspecting depositors' money to a few influential corporate defaulters. As per the scheme's provisions, banks are to accept the outstandings as on Ma rch 31, 1997 in full satisfaction of the dues. The waiver of interest will be substantial.

While this may be beneficial where there is no adequate security, in all other cases where there is large tangible security available, and which are sub-judice, the scheme virtually allows a waiver that can only be compared with the Agricultural and Rura l Debt Relief Scheme of 1990 introduced by the then government headed by Mr V. P. Singh.

The only difference is that the amount involved then was Rs 10,000 per borrower, who represented the poor and the downtrodden sector, while the amount involved now is Rs 5 crores, and the borrowers are mainly opportunistic corporates, which can then pay the minimum amount and become eligible for a fresh loan.

The RBI, as a controller of banks, has done little to have the legal framework in place to help banks recover the dues. On the other hand, when banks suffer losses on account of such RBI policies, the same central bank will be the first one to criticise the banks for their failures. All this at the expense of individual depositors and tax-payers!

This is the right case for a public interest litigation to immediately stay the RBI scheme and prevent the apex bank from making any more moves that `aid' corporate default.

Related links:
RBI issues NPA settlement norms

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