New Delhi: Communist Party of India-Marxist (CPI-M) General Secretary Sitaram Yechury on Tuesday urged Prime Minister Narendra Modi to name and shame the top 100 corporate loan defaulters, and to desist from the idea of merging State Banks into one entity.
In a letter to Modi on Tuesday, Yechury pointed out "the alarming increase in the non-performing assets (NPA) of state-owned banks" and the central government's "reluctance" to recover these bad loans, while at the same time "hounding" the farmers for petty amounts even in drought years.
"Recent reports show that bad loan provisioning for most state-owned banks doubled — and even trebled in some cases — in 2015-16. There has been a lack of concerted effort to recover these bad loans, and your government has instead waived Rs 59,547 crore of bad loans of big borrowers in 2015-16," Yechury said in the letter.
"All this while, the farmers continue to be hounded for repayment of minor amounts in drought years," he stressed.
The CPI-M leader said that the big borrowers have "viable assets which can be easily recovered by banks, if backed up with political will and determination".
"Instead, we have seen a proposal to divert all the bad loans from state-owned banks by creating a single 'bad bank'. It is an attempt to portray a clean-up of bank account books by diverting the bad loans to a separate new entity, which will still be government owned," Yechury said.
"This 'bad bank' will still be furnished by public money as all the other banks will be recapitalised by your government, while big borrowers would be allowed to go scot free at the cost of the honest tax-payer."
"This amounts to the cronies being rewarded for their profligacy, bad business practices and their lavish personal lifestyles by the hard earned savings of the vast majority of the middle classes and the poor of this country," he said.
Yechury pointed out that a proposal to create a "bad bank" was publicly rejected by former Reserve Bank of India Governor Raghuram Rajan.
He had identified the "moral hazard" problem of this proposal, where the banks would continue to lend to the same big borrowers who would display scant regard for returning these loans.
"Before any attempts at whitewashing the bad loans by recapitalising the banks, the principle of 'Recovery First, Recapitalise Later' must be followed in letter and spirit of your government. To not do so would confirm our worst fears of your government — which has written off Rs 1,12,089 crore of loans of big borrowers — being beholden to crony capitalism," Yechury said.
He said that the need of the hour is for the government to put into practice an urgent action plan to start recovery of pending loans from top 100 borrowers.
"You must begin by making public their names with the due amount... We hope that you will reject this proposal of creating a 'bad bank' and start recovery of bad loans on priority," he said.
"A failure to do so would mean that your government is making our working people pay for the criminality of the rich defaulters."
Yechury had written a similar letter to the Prime Minister on 7 July this year.