NEW DELHI: The Supreme Court on Friday asked the government to focus on the recovery of nonperforming assets at banks and tighten rules to ensure that the problem does not recur, shifting the focus of the debate from naming the big defaulters.
“Disclosure of names leads us nowhere. We want to find out the root cause for the malaise in the system,” a bench led by Chief Justice TS Thakur said. “We want to know why NPAs are accumulating. And, what are the reforms being undertaken to ensure that NPAs do not recur.”
The court had earlier insisted that there was no reason to withhold information on the big defaulters from the public. It had even insisted that disclosing such information would have a salutary effect on the system, a suggestion that the government had rejected.
Solicitor General Ranjit Kumar had in fact submitted, in a sealed cover, a list of those who owed banks more than Rs 500 crore, but had urged the court not to make it public so as not to undermine public confidence in the banking system.
On Friday, however, the three-judge bench, which also included Justices AM Khanwilkar and DY Chandrachud, changed the paradigm of the debate by asking the government to focus on recoveries. “What are the deficiencies in the recovery system,” the CJI demanded to know.
He, however, refused to jump into the issue without first awaiting a report by a committee set up by the government to examine it. Kumar, the second top-most law officer of the government, insisted that the court await the report before acting on the claims made in a public interest petition that the NPAs had reached massive proportions.
The finance ministry is also independently examining the issue. The government is in the process of examining all the deficiencies in the process as well as tightening the statutory regime to ensure recoveries.
The Debt Recovery Tribunal and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 would be strengthened, Kumar said. The government had also brought in the bankruptcy code as a step towards dealing with the problem, he said.
The SG said a committee, predominantly comprising leading bankers, was examining these issues.
The case will now come up for hearing on December 12, after the committee submits its report.