Banks to be armed better to resolve stressed assets: Arun Jaitley

Mumbai: Finance Minister Arun Jaitley on Tuesday said banks, especially the public sector ones, will be armed better soon to resolve the stressed assets as he expects the winter session of Parliament to clear amends to the Prevention of Corruption Act (PCA).

"We need to give public sector banks level-playing field with others. The ability of private sector banker to settle on a stressed loans would depend entirely on banking considerations but a state-run bank is still constrained by some of the obsolete laws which exist", Jaitley said.

Arun jaitley

Finance minister Arun Jaitley. AFP

While addressing the SBI Economic Conclave, he said, "unlike the private sector bankers the state-run banks are constrained by being public servants and the present laws on corruption (PCA of 1988) makes them wary of settling issues purely on commercial considerations".

"I think the fear of consequences at time dilutes the process of resolution", he said adding amending the present corruption law would go a long way in changing this.

Stating that the accountability of public servants who act on such matters are guided by larger public interest, he said, "I think the law also which deals with this is in the final stages of its amending process. It's before the standing committee and I hope in the next session it comes up.

"Yes, the PCA of 1988 constrains a lot of public servants, and also banking" he said.

Admitting that the state-run banks, whose bad loans have topped 15 per cent of their assets in the June quarter, are in bad shape, he said, "We are still struggling to find answers for the health of state-run banks. But we can't push it below the carpet, we have to flag the issues. Therefore, while we flag this issue, the Reserve Bank, the government and Parliament have empowered the banking system with adequate powers."

Bad loans spiked even for the most competitive ones like HDFC Bank in the recent quarters after the Reserve Bank last December had identified around 130 most stressed accounts and asked banks to make higher provisions through the December and March quarters and completely clean their balance-sheets by March 2017.

As a result the bad loans ratio more than topped 14 per cent of the system as of the June quarter.

The Cabinet in April cleared some key amendments to the PCA of 1988 seeking to classify corruption as a heinous crime and longer prison terms for both bribe-givers and bribe-takers. The changes will also ensure speedy trial, limited to two years, for corruption.

The measures include penal provisions being enhanced from minimum 6 months to 3 years and from maximum five years to seven years thus bringing it to the heinous crime category.

The ambit of the existing Act will be enhanced to make commercial entities liable for inducement of public servants.

Under the present law, only individuals are liable.

The proposed amendments Bill also provides for issue of guidelines to commercial organisations to prevent persons associated with them from bribing a public servant.

Non-monetary gratification will also be covered within the definition of the word gratification in the PCA 1988. The Prevention of Corruption (Amendment) Bill, 2013 was introduced in the Rajya Sabha on August 19, 2013, and subsequently referred to the Standing Committee.

Updated Date: Sep 28, 2016 09:01 AM

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