CPI(M) general secretary Sitaram Yechury has written to the prime minister on the non-payment of bank loans of more than Rs 8.55 lakh crore by borrowers, particularly big corporate houses, and requested him to initiate an action plan to monetise the assets of all defaulters. He requested the prime minister to put into practice an urgent action plan to start recovery of pending loans from the top 100 borrowers. “You must begin by making public their names with the due amount; the list is already available with the RBI, your government and the Supreme Court. No further public money must be given to PSBs (public sector banks) till all the assets of the defaulters have been monetised. The failure to do so would mean that your government is making the poor Indians pay for the profligacy of these crony capitalists,” he said. In his letter to Narendra Modi on July 7, Yechury said, “The latest RBI Financial Stability Report has once again highlighted the precarious situation of our banking sector. As of end-March 2016, Gross Non-performing Assets (GNPAs) of all Scheduled Commercial Banks (SCBs) are at Rs 5,60,822 crore, 7.71 percent of their gross advances of Rs 72,73,927 crore. In addition, the restructured standard advances are at Rs 2,94,729 crore, 4.05 percent of the gross advances. This means that more than Rs 8,55,551 crore of the loans given by our banks have not been returned by the borrowers. Going by their response and the action taken by your government so far, it is highly unlikely that these monies will be returned anytime soon. Needless to add, this is every single Indian’s money which has been misappropriated by these borrowers, which are mainly big corporates.” The Rajya Sabha MP referred to the statement of Comptroller and Auditor General (CAG) Shashi Kant Sharma that “there is a belief that a significant part of NPAs could be amounts fraudulently obtained as advances from the banking system. There is also a belief that a large part of these amounts may have been transferred abroad and may never get recovered”. “During your election campaign, you had famously promised to bring back all the black money from abroad and deposit Rs 15-20 lakh in every Indian’s bank account soon after assuming office of the prime minister. Leave alone your promise of bringing that amount back, money from the banking system under your watch, if the country’s top auditor is to be believed, has ‘been transferred abroad and may never get recovered’,” Yechury said. The asset quality of our PSBs is even more critical with a stressed advances ratio of 14.5 percent in March 2016. The provision for doubtful and loss assets of PSBs stands at Rs 1,85,840 crore, resulting in all nationalised banks reporting a net loss of Rs 20,590 crore. In fact, the total market value of PSBs is far lesser than NPAs owed to them, an extremely alarming situation. “You are well aware that the top ten corporate houses owe a staggering amount of Rs 7 lakh crore to PSBs and financial institutions.” As per a report last year, Adani Group had gross debt of Rs 96,031 crore, Essar Group Rs 1.01 lakh crore, GMR Group Rs 47,976 crore, GVK Group Rs 33,933 crore, Jaypee Group Rs 75,163 crore, JSW Group Rs 58,171 crore, Lanco Group Rs 47,102 crore, Reliance Group Rs 1.25 lakh crore, Vedanta Group Rs 1.03 lakh crore and Videocon Group Rs 45,405 crore. As per the RBI, the ratio of GNPAs of top 100 borrowers to total NPAs of banks is 19.3 percent, as of March 2016, up from 0.7 percent in March, 2015. “While the NPAs have increased by nearly 80 percent in the last one year, it is sad to note that your government’s efforts for greater recovery have not shown any corresponding rise in the resolve to recover these. The total recovery done in FY 2015-16 by all the public sector lenders was Rs 1.28 lakh crore, which included 46 per cent of this amount being written off. The recovery in FY 2014-15 was already Rs 1.27 lakh crore, which gives credence to the view that your government is not serious about recovering public money from these defaulters,” he wrote. “Many of these facts have come to our notice because of the stringent Asset Quality Review (AQR) undertaken by the Reserve Bank of India (RBI) under Raghuram Rajan. Having been constantly attacked by your party MPs and leaders, Rajan is now leaving his post in September while the AQR process ends in March next year. “Your silence, while an important constitutional functionary was being viciously attacked, has led many to believe that you are not interested in completing the bad loan clean-up exercise. This leaves no other explanation but to conclude that your government actively patronises and promotes ‘crony capitalism’. Recent media reports suggest that your office has mooted a scheme to recapitalise the PSBs by using Rs 3-4 lakh crore from RBI’s capital base. This is a dangerous idea as it diminishes RBI’s capacity to withstand internal and external economic shocks. The RBI has been a fiercely independent institution and by following such a diktat, the central bank would be seen as a government tool. Moreover, by becoming owners of these banks, the RBI will have mixed objectives as it conducts and regulates monetary policy,” Yechury said. None other than the RBI governor himself has opposed the idea, which was floated first in this year’s annual economic survey. At a speech in Bangalore last month, Rajan said, “The Economic Survey has suggested the RBI should capitalise public sector banks. This seems a non-transparent way of proceeding, getting the banking regulator once again into the business of owning banks, with attendant conflicts of interest.” “I urge you to recollect that in order to avoid such a conflict of interests, on the recommendations of the Malegam Committee, the government of India bought RBI’s 59.7 percent stake in State Bank of India (SBI) at Rs 35,531 crore in 2007,” Yechury wrote to Modi. Moreover, while proposing the idea in the annual economic survey, the Chief Economic Advisor (CEA) had categorically warned that, “Most important, any such move would need to be initiated jointly and cooperatively between the government and the RBI. It will also be critical to ensure that any redeployment of capital would preserve the RBI’s independence, integrity, and financial soundness – and be seen to do so.” “In accordance with the CEA’s warning, the move to recapitalise the banks from RBI’s capital base, having been opposed by the RBI governor himself, needs to be shelved forthwith. The government must find a transparent way to do so, instead of surreptitiously trying to maintain its fiscal deficit by eroding RBI’s capital base. In any case, no plan to recapitalise the banks must be executed without an action plan for recovery of unpaid loans. Your government has not put the big business houses under any pressure to return the loans. They continue to flash their lavish lifestyles and their personal wealth remains unaffected. While the crony capitalists make merry, your government is harsh on poor farmers, ruined under the onslaught of two consecutive droughts, face confiscation of their utensils and cattle when they can’t pay a loan of a few thousand rupees!” he said.