Public Sector Banks Constrained By Obsolete Laws, Says Arun Jaitley
Amending the Prevention of Corruption Act will enable bankers to take better decisions: FM
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The problem of bad loans facing the Indian banking sector is among the biggest challenges for India, said Finance Minister Arun Jaitley while speaking at the State Bank of India’s Economic Research Conclave in Mumbai.
While conceding that this challenge is yet to be tackled, the finance minister said that the government is trying to remove some obstacles faced by public sector bankers in the form of obsolete laws.
The government is in the process of amending the Prevention of Corruption Act 1988 which will enable bankers to take decisions in the best interest of the banking sector, said Jaitley.
While the finance minister did not go into details, a September 13 PTI report had said that proposed amendments may make it mandatory for probe agencies like the Central Bureau of Investigation to seek prior approval from the competent authority before taking action against public servants.
PTI reported that the amendments are based on the recommendations of a select committee of Rajya Sabha.
No police officer shall conduct any enquiry or investigation into any offence alleged to have been committed by a public servant under this Act, where the alleged offence is relatable to any recommendation made or decision taken by such public servant in discharge of his official functions or duties, without the previous approval.Rajya Sabha Select Committee Report
The amendments, if pushed through, would be beneficial for public sector bankers who often shy away from taking tough decisions, which could be questioned later. For instance, public sector banks have been hesitant to take large haircuts on bad debt due to such concerns.
Fear of consequences at times dilutes the ability of public sector banks to take a decision, said the finance minister.
Commenting on the health of the banking sector, Jaitley said this remains a key unresolved challenge for India.
“The RBI and the government have empowered banking sector with adequate powers. We now look forward to the banking sector being able to support India’s growth,” said Jaitley.
Indian banks are sitting on a pile of nearly Rs 6 lakh crore in bad loans. While an asset quality review of bank balance sheets forced banks to recognise stressed assets, banks are struggling to find a resolution for these bad loans.