It’s a known fact that decisions of every Ministry is taken by the Prime Minister’s Office (PMO), which has officers responsible for each Ministry. For a population of 130 billion, one PMO, which earlier talked about minimum government, maximum governance, is proving to be a disaster.
Take the case of National Company Law Tribunal (NCLT) which was set up on 1st June 2016. It was told that NCLT will settle cases in 180 days. It paved the way for resolution professionals who are just Chartered Accountants and retired bank officials. 15 NCLT benches are functioning, where retired judges are deciding the cases referred to them. Now after 41 months of their functioning PMO has come out with a note, “Prevailing bad loans situation with banks” which says NCLT infrastructure is proving woefully inadequate to deal with the quantum of cases flooding the system.
When experts pointed out the same in 2016, neither the PMO nor the Finance Ministry listened. Now instead of the Finance Ministry or the Banks Board Bureau created by it, or the RBI is circulating this note but the PMO. Concentration of power in PMO is affecting the functioning of the Ministries.
Now, look at the Non Performing Assets (NPA) position and NCLT orders. As per the report of the Insolvency and Bankruptcy Board of India, more than half of the cases settled are by liquidation of the company. That means banks lost everything they lend or got only a small piece of liquidation amount. In the third quarter of 2020, the haircut was 88% for the cases resolved.
This Government never bothered to act on the recommendations of the Parliamentary Standing Committee on Finance, which had its own party members also. Instead, they went by IMF & WB directions and constituted the NCLT, which is proving to be disastrous. How can a company in which the stakeholders are not able to turn around, can be turned around by one chartered accountant or a retired banker? They actually have become brokers between the company and the bankers to decide the haircut (write off).
Now PMO has woken up and say that Bank should refer only cases where the loan is above Rs 200 crore to the NCLT. Will this solve the crisis? Absolutely not. The root cause of the problem is the weakening of the economy as pointed out by the Standing Committee.
The problem requires a holistic approach based on real analysis of the causes, fixing responsibility and finding solutions to recover loans and not to write off. PMO as Super Power Ministry can never solve the problems of the huge country.
“Good Governance is the art of putting wise thought into prudent action in a way that advances the wellbeing of these governed.” –Diane Kalen Sukra
Thomas Franco is former General Secretary of All India Bank Officers’ Confederation.