CAG to scrutinise NPAs in PSU banks
On a day when a Parliamentary panel raised serious questions over the mechanism to deal with bad loans issued by RBI and public sector banks (PSBs), the Centre may face another volley of questions as the national auditor is all set to audit non-performing assets (NPAs).
The Union Finance Ministry, headed by Arun Jaitley, has approved the request of Comptroller and Auditor General (CAG) of India to examine the account books of NPAs declared by PSBs, which amounts to Rs 1.14 lakh crore.
“Given that such PSBs don’t come under the ambit of CAG audit, the national auditor decided to write a letter to Department of Financial Services to review NPAs of PSBs as these banks get a huge amount of revival fund from the Central government and examining the transactions of government is the principal objective of the apex auditor,” a source said.
According to sources, the move to write off Rs 1.14 lakh crore of bad debts between financial years 2013 and 2015 by some 29 banks raised the national auditor’s eyebrows, who decided to look into NPA accounts.
“The CAG would scan the reasons as to how the bad loans, which reportedly increased at 4 per cent during 2004-13, rose to 60 per cent during 2013-15. Even RBI has reported that the bad debts stood at Rs 15,551 crore for the financial year ending March 2012, which then shot up by over three times to Rs 52,542 crore by the end of March 2015,” a source said.
Voicing concern over the rise in number of NPAs, former CAG Vinod Rai said, “The need of the hour is transparency. When Air India runs up losses of Rs 32,000 crore, we get the government to infuse capital over a period of time, without ensuring that the reason for the loss is addressed in the first place. Promoters of major companies cause similar humongous losses to PSBs and force the government to write-off their debts. No one seems to want to cause pain to these borrowers.”
However, the source maintained that there are 10 top banks that have been rather generous in this write-off exercise. “The audit of NPAs would put several major companies under the CAG scanner, including Kingfisher, which is owned Vijay Mallya, which has about Rs 7,000 crore of bad loans against it,” the source said.
Raising serious questions on the mechanism to deal with bad loans, Parliament’s Standing Committee on Finance said, “Such high incidence of NPAs obviously raises serious questions on the credibility of the mechanisms to deal with NPAs and stressed loans as such, even as certain estimates indicate that gross NPAs may touch Rs 4 lakh crore by the end of this fiscal year.”
As of September 2015, the net NPAs of public sector banks stood at Rs 2,05,024 crore, while the gross NPAs were at Rs 3,69,990 crore.