Govt to set up board to reconstruct weak PSU banks

Ruling out closure of three weak public sector banks, as apprehended by Opposition members, Sinha also said the Government was looking into the proposal for setting up Asset Reconstruction Company as recommended by the M S Verma Committee.

Admitting that NPA in PSU banks and financial institutions had mounted to Rs 58,000 crore, Sinha said Government would come down heavily on defaulters. He countered members allegation that the bank defaulters go scot free by saying as many as 33 criminal cases have been filed in the case of Indian Bank listed one of the three weak public sector banks along with Uco Bank and United Bank of India. Sinha clarified that setting up of FRA was part of a new mechanism being contemplated to deal with weak banks.

Allaying fears of the Opposition that public sector banks were being privatised, Sinha said the move to reduce government equity to 33 per cent was aimed at recapitalisation of banks by tapping capital markets as the Government did not have money to provide for it.

He said public sector character would be retained through a legislation and shares will be sold to the public so that no one cornered it. Sinha admitted that Rs 58,000 crore NPA in public sector banks and financial institutions did not include the interest component but this did not mean that interest dues would not be recovered.

He said it was not correct to say only big industrial houses were responsible for the large NPAs. He quoted statistics which said there was a good percentage of bank loan defaulters in the small scale industry, medium industries and agricultural sectors as well. Sinha said while NPAs of public sector banks were coming down, those in the private sector banks and foreign banks have been going up in the last three years.

PSU banks NPAs at 15.9 per cent compared well with old private sector banks which was around 13 per cent in 1998-99, he said. To the demand of CPI member Gurudas Das Gupta to amend the Official Secrets Act to allow publishing names of bank loan defaulters, Sinha said he did not favour such a proposal.

Earlier, Gupta placed on the table of the Rajya Sabha an authenticated list of bank defaulters.