SC turns down Swamy’s plea seeking guidelines to tackle rising NPAs in banking sector
Asking to file a suggestion to the Reserve Bank of India (RBI), the Supreme Court on Thursday refused to entertain a plea of BJP MP Subramanian Swamy seeking to frame guidelines to check the menace of ever-rising Non Performing Assets (NPA) in the banking sector. The apex court observed that guidelines on NPA are a matter of policy and fall in the domain of executive and Reserve Bank of India.
A bench of Justices D Y Chandrachud, Vikram Nath, and B V Nagarathna, however, allowed Swamy to make a representation before the RBI which may consider making changes in the appropriate guidelines. “How can we frame guidelines for the ever-rising NPAs. RBI has issued guidelines from time to time. It is not possible for the court to tread into the domain of the executive,” the bench said.
Swamy said that the Court is not barred from constituting a committee and added that RBI is maintaining extraordinary secrecy with regard to NPAs.
Swamy argued that his petition deals with the issues of ever-rising NPAs in the banking sector, and this Court should constitute a committee that would suggest necessary guidelines to check the rise in NPAs. His petition pointed out the Credit Suisse report on the top 10 Corporate houses with more than 12 lakh crore bad loans and NPA. He suggested single window clearance to big loans above Rs.100 crore and prevention of giving loans by pledging shares.
The Court said that from time to time the government and the RBI have both issued guidelines on the issue. Swamy said that the Court is not barred from constituting a committee and added that RBI is maintaining extraordinary secrecy with regard to NPAs. He said that when the bank closes down, people have to run from pillar to post.
The bench disposed of the petition and granted liberty to Swamy to make a representation to RBI seeking modification of the existing guidelines and also the specific issues with regard to loans against shares. The Bench said that the relief sought by Swamy are core issues of policy that can only be framed by the RBI and the matter may not be amenable to judicially manageable standards as the Court may be treading into the domain of policy.
Citing the 2015 Credit Suisse Report, Swamy in its petition said that the top 10 Corporate borrowers (as of March 31, 2015) are Anil Ambani led Reliance ADAG Group (Rs.1,25,000 crore), followed by Anil Agarwal led Vedanta Group (Rs.1,03,000 crore, Ruia family-led Essar Group (Rs.1,00,000 crore), Gautam Adani led Adani Group (Rs.96,000 crore) and Jaypee Group (Rs.75,000 crore). Other five big borrowers mentioned in the report are JSW Group (Rs.58,000 crore), GMR Group (Rs.48,000 crore), Lanco Group (Rs.47,000 crore) , Videocon Group (Rs.45,000 crore) and GVK Group (Rs.34,000 crore).
Swamy’s petition said that for above Rs.100 crore loan granting there would be a pan-India single-window mechanism monitored by RBI or a suitable body to prevent the plundering of public money by the Corporate Houses. He pointed out that many Corporates took loans by pledging shares by creating hype in stock exchanges. “As of June 30, 2019, shares were pledged in 495 of the 1,621 main-board companies listed on NSE with some of the companies having 100% promoter shares already pledged. As per a report by Kotak Securities, it was noted that CG Power and Industrial, Kwality Ltd., Reliance Naval and Engineering, IL&FS Transportation Networks, and Sterlite Technologies were the five companies from the BSE-500 index, whose promoters have pledged over 95 percent of their holdings in the December quarter of the financial year 2018-19 (Q3FY19).
“Among them, promoters of CG Power and Industrial, Kwality and Reliance Naval pledged 100 percent of their holdings, the report says. Among the Nifty50 companies, Zee Entertainment saw 59.4 percent of promoter shares being pledged, while the percentage for Adani Ports & SEZ stood at 45.5 percent in December quarter, the report says. The percentage of pledged promoter holdings for JSW Steel, IndusInd Bank, and Indiabulls Housing Finance stood at 43.6 percent, 26.4 percent, and 12.7 percent, respectively,” said Swamy’s petition pointing out the various methods by many big corporates in getting huge loans from banks by pledging the shares.
After the Supreme Court’s order Swamy tweeted:
Today the SC in my WP on NPAs of large corporates directed the RBI consider my representation on ensuring NPAs by large corporates do not happen and steps taken for its implementation. This now gives me a mandate to pursue the RBI for transparent action
— Subramanian Swamy (@Swamy39) October 7, 2021
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