10 July 2002

BANK DEFAULTERS TWIST JASWANT'S ARM

From Jal Khambata

NEW DELHI: The Government is retracting the gun aimed at big industrial and business houses who have almost emptied banks by borrowing heavily and then refusing to pay.

Within three weeks of promulgation of an ordinance on June 21 empowering banks and financial institutions to seize assets of such defaulters after giving 60 days' notice, the Government on Wednesday appeared yielding to big sharks' pressure to promise a "relook."

The promise came from new Finance Minister Jaswant Singh at a meeting of the Prime Minister's Trade and Industry Council where both FICCI and CII, the apex bodies of trade and industries, pleaded that the ordinance would hit everybody without any distinction between the willful and non-willful defaulters.

The Ordinance was promulgated specifically to recover the banks' money locked in the "non-performing assets" of the big borrowers without going through the long-drawn process of litigation in courts as almost one-fourth of banks' money is blocked in loans to such defaulters affecting their profitability and causing difficulty to give loans to others.

Jaswant Singh, however, felt no harm in readily conceding to the trade and industry's demand, pointing out that "the government's intention is not exproprietory" and hence he would have a relook at the ordinance before it brought before Parliament as a Bill.

Pointing out that all that the Government wants is that "borrower must honour borrowings and the lender's money should go back to lender," Jaswant Singh said the Finance Minister's role is not that of a "policeman" but that of "facilitator" who helps reactivate economic recovery.

There was no problem in making changes the trade and industry wants while moving the Bill to replace the Ordinance, he said while pointing out that "there is a great deal that can be done to improve" while converting any ordinance into the Bill."

The trade and industry representatives took the stand that they were not against penalising willful defaulters but there should be checks and balances by providing for appeals in the ordinance.

And, Jaswant Singh fell for this excuse as being new in the Ministry did not have any exact idea of provisions of the ordinance since otherwise he would have told them that it already provides for not one but two appeals, first before the Debts Recovery Tribunal and thereafter before the Appellate Tribunal.

The Ordinance, The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, had provided for setting up of securitisation and reconstruction companies who will take over the assets in which banks' money is blocked to help them recover loan and interest. END