A bench led by Justice Sanjay K Kaul gave four weeks for the RBI to file its reply. The direction came after the central bank said it had accepted the recommendations of the five-member committee, constituted by the government to study banking reforms.
Among its suggestions on recovering non-performing assets, the committee in 2017 said banks must publish on their websites the list of defaulters whose names are already in public domain or where recovery proceedings are initiated under the Sarfaesi Act. It said also promoters should be personally made liable for any siphoning off of funds.
Instructions are being issued mandating banks to examine and take a view on classifying an account as a case of wilful default or not within 60 days of it becoming an NPA (where the exposure is more than ₹50 crore), the RBI said in an affidavit.
The central bank said it was expanding the definition of wilful defaulters to include borrowers who had committed to infusing equity but eventually failed to do so. It is also exploring the feasibility of banks using data from the Central Repository of Information on Large Credits to gather information on the group entities of borrowers.
The RBI claimed that its efforts had resulted in a material decline in NPAs.
During the hearing, Justice Kaul commented: “We have to balance the issue of public money and seeing that the ending procedure is not too cumbersome … We have seen many cases where nothing happens, those who had invested were left high and dry.”The judge said priority should be on cases where the amount is huge.
Solicitor general Tushar Mehta, appearing for the government, said bank-customer relationships were fiduciary, and that separate regimes were in place to tackle the issue through statutes like the Insolvency and Bankruptcy Code and the Sarfaesi Act.