Bad loan resolution comes first, consolidation later: Vinod Rai


Banks Board Bureau (BBB) chairman Vinod Rai has said resolution of stressed assets is the first priority of public sector banks while the issue of consolidation in the sector can be considered later.

“See, just now, banks are engaged in resolution of their stressed assets. So what we are proposing to do is to resolve that quickly first because we do not want to saddle banks with greater issues,” Rai said after delivering the Lalit Doshi Memorial lecture here. “Consolidation is not a small issue, it requires a huge amount of resources in terms of human resources. It will come by and by… and work is in progress and we will figure out some methods by which it is done but in due course.”

“Recovery is absolutely on top of the agenda so that the lending process can start again,” Rai said. “I don’t know whether the time is ripe but the government’s intention is to bring about some consolidation,” Rai said on consolidation among PSU banks.

On various measures being discussed to tackle bad loans, Rai said, “lots of discussions have taken place and I cannot single out any single discussion. The entire idea is how to resolve the stressed assets. So lots of experiments are being drawn and lots of discussions are taking place… some of these things would fall into place very soon. The government will take up some of these ideas.”

On the impact of the 2G spectrum report, Rai who was the Comptroller and Auditor General (CAG), said, “I think it’s sufficient consolation for all of us that for the irregularities that were committed, certain people had to go to prison. The fact that they had spent one and a half years in prison is good enough for deterrence for anybody in future. As far as losses are concerned, recouping losses in revenue transactions have been done… but presumptive losses are not losses public exchequer have foregone, but in terms of resources which could have been coming to the exchequer in some way… to recoup that kind of things is very difficult.” CAG had calculated that the presumptive loss figure ranged between Rs 57,000 crore and Rs 1.76 lakh crore.

“To a large extent recoup may not be feasible, but to the extent that we are able to deter such irregularities in the future,” Rai said. He said the auditor brings out the report in the public domain. “Beyond that it’s the role of investigative agencies and after that the judicial process. In India, the judicial process takes a huge amount of time,” he said.

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“The legislature can’t discharge all the powers directly by constitution, it creates institutions such as independent regulators, public auditors, vigilance and public service commission with an arm’s length approach for transparent and effective functioning. The core belief is to allow independence and freedom of functioning. Permitting such freedom will enhance the trust between the government and people of probity, ethics and objectivity. Any impairment in the functioning of these institutions will lead to erosion in the credibility of the government,” Rai said.

Rai said accountability of institutions ensures that no one is above the law and is accountable for his actions. It (CAG) ensures parliamentary control over expenditure voted by the legislator. “Accountability and transparency, the two cardinal principles of good governance in a democratic setup depend to a very large extent how this public audit function is discharged,” he said.

“Once audit observations have been made, the executive has the option of either stonewalling them or positively hearing them to make corrections in their action,” he said.