Prevention of Corruption Act deterring certain banks from taking honest decisions: FM

Public sector banks seeking to honestly address the problem of non-performing assets through certain steps are facing the anxiety of being questioned about their decisions by probe agencies years later, Finance Minister Arun Jaitley said on Thursday.

During a discussion on the Banking Regulation (Amendment) Bill, 2017, in the Lok Sabha, Jaitley called for a political consensus and will to address the problem of mounting non- performing assets (NPAs) of the public sector banks.

Talking about steps against certain wilful defaulters, he asserted that banks will take action against those involved in frauds.

He also said that RBI may refer more cases to the banks to initiate insolvency proceedings against defaulters.

The Banking Regulation bill seeks to replace an ordinance which had conferred powers on the Centre to authorise the Reserve Bank of India to issue directions to banks to initiate insolvency proceedings against loan defaulters.

Jaitley said provisions under the Section 13 of the Prevention of Corruption Act are deterring certain banks from taking honest decisions to take innovative steps to address the problem of the stressed assets as they may be viewed as erroneous from a historical perspective years later.

The finance minister said the pre-liberalisation-era law can be extended to decisions taken with an honest approach and that is why there are apprehensions among certain banks. He said certain laws have become obsolete.

A strong banking system is essential to support economic growth and the government is determined to achieve it, he said.

Jaitley identified steel, textile and road infrastructure sectors as major contributors to NPAs and cited reasons for stress on them.

He said steel sector globally faced difficulty due to surplus steel production by China and it impacted Indian industry as well.

Jaitley indicated that RBI may ask banks to refer more cases to the banks for taking up insolvency processes.