New Delhi, Aug. 4: The arrest of Syndicate Bank chairman and managing director S. K. Jain last week for allegedly taking bribe to continue credit to defaulting companies has turned the spotlight on the large-scale rewriting of loans in public sector banks.
There have been complaints earlier about banks not following set norms to rewrite loans that stood the risk of repeated defaults.
Officials said the Syndicate Bank case would prompt the ministry to order a review of many bad loans that had been rewritten or not declared non-performing assets (NPAs).
Also on the radar would be industrial groups, who were not termed defaulters despite their individual group entities turning NPAs.
Between 2008 and 2014, corporate debt restructuring through provisioning, waivers, write-offs, concessions and one-time settlements totalled a massive Rs 325,000 crore. Write-offs of bad loans by PSU banks alone in the past seven years stood at Rs 140,000 crore.
Bad loans of domestic banks have mounted to 4.2 per cent of the total lending as on September 2013 compared with 2.4 per cent in 2009.
According to bank unions, the country’s top four bad loan accounts add up to Rs 22,666 crore, which include Kingfisher Airlines and Winsome Diamond and Jewellery Co.
The government had earlier taken an in-principle decision to take steps to bail out projects that have run up huge bad loans in crucial sectors such as power, steel, mining and infrastructure. However, after the Syndicate Bank case, it will be difficult for the finance ministry to give such directions or for bank boards to agree to loan restructuring of these projects.
The government today suspended Jain. Financial services secretary G. S. Sandhu said the finance ministry had received a preliminary report from the CBI on Jain, based on which he was suspended.