Bombay HC issues notice to RBI on ballooning NPAs

FEXpress Aamir Khan | Mumbai |  October 17, 2014 1:38 am

The Bombay High Court has issued notice to the Reserve Bank of India in connection with a PIL which alleges that the non-performing assets (NPA) of nationalised banks swelled up from Rs 455 crore for the year ended March 2008 to Rs 9,190 crore in March 2012.

However, according to the RBI annual report, gross NPAs for public sector banks for FY 14 stood at 4.7 per cent of gross advances, or approximately Rs 2.8 lakh crore.

Justices AS Oka and GS Kulkarni gave the direction while acting on a PIL filed by activist Ketan Tirodkar, seeking directions to the RBI to register a case with the CBI to probe into the “fraudulent sanctions” leading to such huge NPAs. Once the borrower has failed to make interest or principal payments for 90 days, the bank loan is considered to be a NPA.

Relying on RTI replies obtained from the RBI, Tirodkar told the HC that there were over 140 cases of fraud of around Rs 15 crore each reported to the CBI by various banks between the years 2008 and 2012. However, he alleged, there was no information about whether or not cases of NPAs were registered with the investigating agency.

Nationalised banks have not complied with the Banking Regulation Act, 1969, which mandates periodical submission of audit reports to the RBI, alleged the petitioner.

“The Act is not complied with in order to suppress the NPA scenario and shield the culprit beneficiaries working in collusion with the banking authorities,” the PIL alleged.

The involvement of bank authorities commences at the stage when a would-be defaulter approaches the bank to extract a loan against a flimsy proposal / asset with the intention to dupe the bank in future, said the PIL.

While stating the “modus operandi” of banking authorities, the petitioner said they act in connivance with the future defaulters, decorate artificially the feasibility report, to sanction the proposal.

“The NPAs start accumulating at the end of the quarter which goes unreported to the RBI for a long time. Subsequently, such huge volumes of NPA, when they finally get reported to the RBI, have passed the stage of correction, and the RBI and the banks are forced to either write them off completely or to settle them for peanuts,” Tirodkar claimed.

While issuing the notice, the HC has posted the hearing on December 9.