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7:27 am - Tuesday January 23, 2018

AIBEA welcomes Additional Capital to Public Sector banks

Agencies, Hyderabad

All India Bank Employees’ Association (AIBEA) has welcomed the announcement of additional capital to the public sector banks by the Union government few days ago. In response to the emerging crisis in the banks, the Government has announced additional capital to the public sector banks.

‘’No doubt, this is a welcome measure because the banks are starved of capital and this additional capital will help them to do some more lending’’. ‘’But this by itself will not help the banks to come out of the mess they are in now.

All banks are facing the problem of mounting bad debts/non-performing loans and if the restructured loans are added, the total NPA is more than Rs. 15 lakh crore’’, AIBEA General Secretary Ch Venkatachalam told UNI. He said the bulk of these bad loans are the contributions of big corporate companies many of whom are deliberate and willful defaulters.

Taking huge loans and not repaying the same has become an exquisite art because these people know that nothing will happen to them and they will get political patronage of the government. Mr Venkatachalam said because the bad loans are increasing alarmingly, the banks are compelled to make huge provisions from the profits and profits are depleted to prevent internal generation of capital.

The entire profits earned by the banks have gone for making provisions for bad loans. Hence capital is eroded and Capital Adequacy Ratio is adversely impacted, he said, adding that ‘’giving additional capital is an immediate short term solution. But recovery of bad loans is the real long term solution.

That is why we (AIBEA) have been demanding that the government take stringent measures to recover the bad loans. But the government is reluctant to take action on the corporate defaulters’’. Mr Venkatachalam said deliberate and willful defaulters should be termed as criminal offenders and criminal action should be taken against them. But instead the Centre is forcing the banks to go for insolvency proceedings by which loan will not be recovered and the defaulter company will be able to escape his liability to repay.

He said RBI has conceded this and that is why they are asking banks to accept sacrifices and provide huge amount towards these bad loans. Only 12 corporate companies have defaulted Rs 2,53,000 crore, he claimed. Hence this year also, the entire profits of the banks are likely to be siphoned off for making provisions for these bad loans. Thus banks are entering a crisis zone.

Taking tough action and recovering the money is the urgent need. But the government has chosen the soft option of giving additional capital the Banks to avoid taking action on the corporate defaulters, Mr Venkatachalam said.

The government is also talking of making our Banks bigger through mergers to masquerade the extent of bad loans. In India , we need good banks to help the common poor people and there is no need for big banks which had proved to be risky in many western countries including US. India cannot afford such experiments because we are dealing with huge precious public savings, he said.

‘’While welcoming the decision to give additional capital to the banks as an immediate relief to the banks, we demand publish the names of defaulters, debar bank loan defaulters from contesting election or holding public office, taking stringent measures to recover bad loans, and ensure accountability for these huge bad loans.

‘’We demand recovery and not write off of bad loans. We need cure and not just relief,’’ the top Union leader remarked.

Posted in: Business

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