File photo: Prime Minister Narendra Modi with Finance Minister Nirmala Sitharaman at a public rally in Amethi, Uttar Pradesh (Photograph: PTI)

Budget 2019: Bank Unions Want Rework Of IBC, Shut Down Of ARCs

Bank unions have called up on finance minister Nirmala Sitharaman to enact strong recovery laws with a provision to confiscate personal assets of directors of defaulting companies.

In a pre-budget representation, the All India Bank Employees Association said, “to facilitate loan recoveries, laws should be enacted/amended to confiscate personal assets of the directors in case of default by a company”.

Fast-track courts shall have to be vested with more powers to recover bad loans and stringent laws should be enacted to ensure more recoveries, the bank unions said in a letter to the finance minister.

They also called for shutting down asset reconstructions companies.

Sitharaman, India’s first full-term female finance minister, will present the full Union Budget 2019 on July 5.

The letter further said the Insolvency and Bankruptcy Code is facilitating defaulters to get away easily as banks are forced to take huge haircuts.

“The IBC favours resolution of bad loans instead of recovery. Hence, recovery mechanism should be strengthened instead of resolution process,” the letter said.

To make the bankers more accountable, they said a system must be evolved to ensure accountability and responsibility on the part of chief executives, executive directors and other senior executives of state-run banks who are involved in credit sanctions and of the loans became NPAs within one year.

With rise in NPAs, the government should institute more debt recovery tribunals and fast-track courts to recover bad loans, it said, adding, “wilful defaults should be declared a criminal offence by suitable amendments”.

“The RBI should publish the list of defaulters, who owe to banks more than Rs 1 crore, every six months with updates,” the letter said.

The unions also suggested the finance minister to announce a separate development finance institution/bank to finance infrastructure projects.

“In the absence of domestic financial institutions, the public sector is now extending long-term credit to infrastructure projects and thus there is a distinct asset and liability mismatch. Short-term funds of banks are locked up in long-term projects, inflating NPAs,” the letter said.

They also suggested that RBI should stop issuing licences to private sector banks and also scrap on-tap licensing policy.

Also read: Budget 2019: Bankers Seek Special Liquidity Window For NBFCs, Panel To Review Bad Loan Provisions

Bloomberg Quint

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