Dismissing rumours of loan waiver for big corporates, Finance Minister Arun Jaitley on Tuesday said the government has been taking firm action against defaulters and is making efforts to make 'mazboor' banks 'mazboot' by recapitalising them.
Observing that the government has not waived any loans of big NPA defaulters, he regretted that over the last few days, a rumour is being propagated about "waiver of loans of capitalists by banks".
Refuting the rumour, he said the time has come for the nation to know the facts. "One should ask at whose behest the loans which have turned NPAs were disbursed between 2008 and 2014 by public sector banks (PSBs)," the minister said.
"The public needs to ask the rumour-mongers at whose behest or under whose pressure were such loans disbursed. They should also be asked that when these debtors delayed in repayment of their loans and interest thereon to PSBs, what decision was taken by the then government," Jaitley further said.
He noted that rather than taking firm decision against debtors, the then government relaxed the loan classification norms to keep defaulters as non-NPA account holders.
As a result of asset quality review (AQR), he said loans of about Rs 4.54 lakh crore, which were actually fit to be NPA and were under the carpet, were recognised.
"The government has not waived any loans of big NPA defaulters...," the minister asserted.
Under the new Insolvency and Bankruptcy Code, he said cases have been instituted in the National Company Law Tribunal for time-bound recovery from 12 largest defaulters.
These 12 defaulters+ account for non-performing assets totalling Rs 1.75 lakh crore.
Cases for the recovery of NPA dues from the assets of these big defaulters are under way at various stages.
"At the same time, banks were given necessary capital so that public sector banks become strong and capable of contributing to the nation's development. The reason for giving capital to banks is that these banks may become mazboot, ie, strong, rather than mazboor, ie, hard-pressed," he said.
Jaitley further said that with the object of increasing credit off-take and creation of jobs, the government has taken "the big decision" of capitalising state-owned banks.
Under this, with maximum allotment in the current year, capital increase of Rs 2.11 lakh crore would be effected within two financial years.
"Through capital infusion, banks weakened by NPAs would become strong and become capable of raising adequate capital from the market," Jaitley said.
To receive the capital, banks will have to carry out several reforms so that such situations do not recur, he added.
Jaitley further said that through strong steps taken over the last three years, "not only have the problems received as legacy" been addressed, but reforms for rebuilding the strength of public sector banks have been boosted.
The minister said the process of creation of strong and large banks began with the integration of State Bank of India, and the recapitalisation announced will bolster this process.
"While honest businesspersons will be able to access loans from strong and reformed banks, strict and clear law and the all-round clean-up initiated by the government would result in a clean system in the country," Jaitley added.