Hot Off The PressNews

The Ministry of Finance has taken a number of steps to eliminate fraudulent banking practices. This was stated by Shri Anurag Thakur Minister of State for Finance & Corporate Affairs in a written reply to a question in the Rajya Sabha on 19-11-2019. He stated that steps include, inter-alia, the following:

  1. Government has issued “Framework for timely detection, reporting, investigation, etc. relating to large value bank frauds” to Public Sector Banks (PSBs) for systemic and comprehensive checking of legacy stock of their non-performing assets (NPAs), which provides, inter-alia, that—
  • all accounts exceeding Rs. 50 crore, if classified as NPAs, be examined by banks from the angle of possible fraud, and a report placed before the bank’s Committee for Review of NPAs on the findings of this investigation;
  • examination be initiated for wilful default immediately upon reporting fraud to RBI; and
  • report on the borrower be sought from the Central Economic Intelligence Bureau in case an account turns NPA.
  1. Fugitive Economic Offenders Act, 2018 has been enacted to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. The act provides for attachment of property of a fugitive economic offender, confiscation of such offender’s property and disentitlement of the offender from defending any civil claim.
  2. PSBs have been advised to obtain certified copy of the passport of the promoters/directors and other authorised signatories of companies availing loan facilities of more than Rs. 50 crore and, decide on publishing photographs of wilful defaulters, in terms of the instructions of RBI and as per their Board-approved policy and to strictly ensure the rotational transfer of officials/employees. The heads of PSBs have also been empowered to issue requests for issue of Look Out Circulars.
  3. For enforcement of auditing standards and ensuring the quality of audits, Government has established the National Financial Reporting Authority as an independent regulator.
  4. Instructions/advisories have been issued by Government to PSBs to decide on publishing photographs of wilful defaulters, in terms of RBI’s instructions and as per their Board-approved policy, and to obtain a certified copy of the passport of the promoters/directors and other authorised signatories of companies availing loan facilities of more than Rs. 50 crore.
  5. In order to bring transparency and accountability in the larger financial system, bank accounts of 3.38 lakh inoperative companies were frozen over the last two financial years.

Ministry of Finance

[Source: PIB]

Business NewsNews

As per instructions of Reserve Bank of India, banks are required to have a loan recover policy, which may cover, inter alia, negotiated settlements of NPAs. As per inputs received from Public Sector Banks (PSBs), all PSBs have One Time Settlement (OTS) schemes. These OTS schemes are in pursuance of Board-approved policies of banks, and are typically oriented towards sectors such as agriculture, Micro Small and Medium Enterprises (MSMEs), weaker sections and education loans, and typically have an upper limit on the amount of NPA.

Insolvency and Bankruptcy Code, 2016 has been enacted for time-bound resolution of stressed assets. Further, the Banking Regulation Act, 1949 has been amended last year to provide for authorisation by the Government to RBI, for issuing directions to banks to initiate the insolvency resolution process under the Code. Under the provisions of this amending legislation, RBI has issued directions to certain banks for referring 12 accounts, with outstanding amounts greater than Rs. 5,000 crore and with 60% or more classified as non-performing as of 31.3.2016, to initiate insolvency process under the Code. In accordance with these directions banks have filed applications in respect of these accounts before the National Company Law Tribunal. Further keeping in view the enactment of the Code, RBI has recently issued a revised framework for resolution of stressed assets, which provides for time-bound resolution of high-value stressed accounts, requiring filing of insolvency application under the Code in case of non-implementation of Resolution Plan within180 days.

Recovery of loans was being effected under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest?(SARFAESI) Act and through Debts Recovery Tribunals. SARFAESI Act was amended in 2016 to make it more effective. Further, six new Debts Recovery Tribunal have been established to expedite recovery.

In addition, under the Public Sector Banks (PSBs) Reforms Agenda announced by the Government in January 2018, PSBs have committed, inter-alia, to ensure for clean lending, strict segregation of roles for appraisal monitoring and recovery, online processing of loans, clean consortium lending arrangements, Stressed Asset Management verticals for stringent recovery, and clean post-sanction follow-up for loans above Rs. 250 crore.

Ministry of Finance

Hot Off The PressNews

Reserve Bank of India  has issued a Prompt Corrective Action (PCA) framework to maintain sound financial health of banks. It facilitates banks in breach of risk thresholds for identified areas of monitoring, viz. capital, asset quality (which is tracked in terms of the net Non-Performing Assets ratio) and profitability, to take corrective measures in a timely manner, in order to restore their financial health. Thus, it is intended to encourage banks to eschew certain riskier activities, improve operational efficiency and focus on conserving capital to strengthen them. The framework is not intended to constrain the performance of normal operations of the banks for the general public.

RBI has placed eleven PSBs, viz., Dena Bank, Central Bank of India, Bank of Maharashtra, UCO Bank, IDBI Bank, Oriental Bank of Commerce, Indian Overseas Bank, Corporation Bank, Bank of India, Allahabad Bank and United Bank of India under the PCA framework.

Ministry of Finance

 

Case BriefsSupreme Court

Supreme Court: Reviewing its judgment dated 9-1-2015, the Division Bench of Chelameswar and Dr. A.K. Sikri, JJ has held that there is no provision for reservation in public sector banks for  SC/ST categories in promotion of  officers  from one grade/scale to the next, when such promotions are to be made on selection basis i.e. on merits.

The Court however, observed that it is open to the State and the banks to consider whether it is feasible to provide such reservation in the officers’ category and if so up to what level.

 The Court had to decide upon the validity of the Madras High Court’s judgment in the batch of appeals, which had decided that in the matter of promotions in the officer grades, a reservation in favour of SC/ST officers was provided for in the Office Memorandum dated August 13, 1997. The Banks contended that there was no rule of reservation for promotion in Class A (Class I) to the post/scales having a basic salary of more than Rs 5700 per month and the OM at best only provided a concession. The Supreme Court had upheld the Banks’ contention observing that  there was no reservation in respect of promotion by selection within only those Group A  posts carrying ultimate salary of  Rs 5700. However, based on other memoranda, it observed  that reservation existed only in respect of those posts carrying basic pay of up to Rs 5700 per month and with the implementation of the Fifth Pay Commission  Report, It would follow that such reservation was applicable to the post carrying pay scale of Rs 18,300. On that basis, it was held that since pay scale of the posts up to Scale VI was Rs 18,300 reservation is to be provided.  This aspect of the judgment was under review.

The Attorney General Mr Mukul Rohatgi submitted that a fundamental error, apparent on the face of the record had crept in para 34 of the judgment wherein the Court had observed that “reservation is provided in promotion by selection qua those posts which carry an ultimate salary of less than Rs 5700 (pre-revised)” while observing in the earlier portion of the same paragraph that “there is no reservation in promotion by selection in Group A posts which carry an ultimate salary of Rs 5700 per month. In such cases it is only the concession that applies”. In spite of deciding the main issue against the respondents, because of the aforesaid error in the judgment, the said benefit was still bestowed by giving reservations to officers belonging to SC/ST category from Scale I to Scale VI. The Court agreed that it was in conflict not only with the earlier portion of para 34 but the  entire conclusion discussed in the judgment. It is clearly an error on the face of record as no such consequence follows. Consequently, the Court allowed the review petitions  by deleting paras 33 to 36 of the judgment, the directions contained therein as well as the directions contained in para 37 . It was to be replaced with

“33. Result of the aforesaid discussion would be to allow these appeals and set aside the judgment of the High Court. While doing so, we reiterate that it is for the State to take stock of the ground realities and take a decision as to whether it is necessary to make a provision for reservation in promotions from Scale I to Scale II and upward, and if so, up to which post. The contempt petition also stands disposed of.”

Guided by the principle of ex debito justitae as discussed in A.R. Antulay v. R.S. Nayak,(1988) 2 SCC 602 and S.Nagaraj v. State of Karnataka, 1993 Supp (4) SCC 595, the Court observed “when an error is pointed out and the Court also finds that there is an error apparent on the face of the record, it would not shy away from correcting that error”. [Chairman  & Managing Director, Central  Bank of India v. Central  Bank of  India SC/ST Employees Welfare Association2016 SCC OnLine SC 19 , decided on  8-1-2016]