Forensic Audit of the Defaulters: Step to Sort out the NPAs

Forensic Audit of the Defaulters

Forensic Audit of the Defaulters

In Recent years, Indian media has been full with news coverage of bankrupted businessman, defaulters, frauds and scams. This time government has decided to take forward step to reduces the count of NPA ( Non Performing Assets). The Government and the Reserve Bank of India are working together on number of changes in rules to reduce the proportion of bad loans in the banking sector, so as to kick-starting the investment cycle and pushing growth. The measures are being finalized include tweaking the existing Joint Lenders Forum for faster resolution of NPAs (non-performing assets), a scheme for onetime settlement of bad debts and penal action for defaulters who have siphoned off loans taken for business purposes. There are also news that PSU ( public sector undertaking) banks have been asked to conduct a forensic audit of top 50 loan defaulters to separate genuine cases of business failure from those where funds have been diverted.

The government might not set up a state-owned Bad Bank to take over NPAs from state-owned banks in the near term, but the Department of Financial Services has been asked to review the existing framework of private asset reconstruction companies over the next few months and submit a report. A large scale auction of bad debts is also being looked into by the government, said by certain sources.

The decision making mechanism might also get bit smoother, so as to take faster decision on restructuring  of loan under JLF. The government may also encourage banks to go for one-time settlement of loans, and this process might be overseen by an oversight committee. The settlement will be done in a manner that it gives comfort to bankers against any regulatory backlash in future.

The proportion of bad loans has been rising over the years, even though the government have announced the Indradhanush plan of reforms for the state-owned banks. Public sector banks’ NPAs surged by over Rs 1 lakh crore during the April-December period of 2016-17. Gross NPAs in the first nine months of the current fiscal rose to Rs 6.06 lakh crore by December 31, 2016, from Rs 5.02 lakh crore during the entire year of 2015-16. The gross NPAs were Rs 2.67 lakh crore at the end of 2014-15.

The amount of total stressed assets, which comprises NPAs and restructured loans, is much higher. Top officials have acknowledged the need to resolve bad debts, in order to push economic growth and bringing the investment cycle back on track. During a meeting of the Parliamentary Consultative Committee Wednesday, Jaitley had said that dealing with bank NPAs is a challenging task and that the government was considering several oversight committees to help with resolution of bad debts.

Members of the consultative committee suggested several measures to deal with the like initiating criminal action against the big willful defaulters, creating a Special Bank where NPAs of all the state-owned banks are transferred, allowing the concerned state government to take part in the auction of stressed assets, fixing the gross NPA in the range of 9-10 per cent and not counting restructured assets as NPAs. Some members suggested that the government must establish a bad bank or a Public Sector Asset Rehabilitation Agency (PARA), which should only consider those NPAs where sector-specific reforms do not work. The Economic Survey for 2016-17 has also suggested the idea of PARA to resolve the problem of bad loans. On the issue of setting-up a “bad bank”, Jaitley said that several possible alternatives exist, and the issue is being debated on public platforms.

Well most of this are what said and what heard, but let’s see how things goes on, how much of it would come in action to solve things practically and just not on papers by words. We all hope for ever growing India with developed environment and lifestyle and with less of such issues which becomes the obstacles for the wheel of success.