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Communist Party of India (Marxist-Leninist)
Friday, 05 May 2017 13:07

Modi Government's Doublespeak on NPAs - PJ James

THE Modi government has been very vocal in explaining the outstanding agricultural loan as impacting credit recovery. In the parliament, the concerned minister has also ruled out any waiver of agricultural loan in the country. As per the government, the total agricultural loan outstanding as on September 30, 2016, stood at Rs 12.60 lakh crore. According to data, while agricultural loan outstanding stood at Rs 1.45 lakh crore with regional rural banks, Rs 1.57 lakh crore at cooperative banks , the same have been Rs 9.57 lakh crore at commercial banks. Out of the total farm loan outstanding, crop loan was Rs 7.75 lakh crore and term loan Rs 4.84 lakh crore. Recently, the Uttar Pradesh government’s Rs 36,359 crore agriculture loan waiver scheme has turned the spotlight on the steadily rising non-performing assets (NPAs) from agriculture sector over the last few years. It has also revived concerns about other state government’s move towards a similar waiver.

However, the Modi government is reluctant to disclose such an information on the debts incurred by corporate defaulters. In the absence of official data, we have to depend on independent sources for such details. In fact, non-performing assets (NPAs) created by corporate giants have been making news for months when the notorious liquor baron Mallya who owed Rs 9,000 crore, to banks fled to the UK with the connivance of the state machinery.

However, in the larger pond of defaulters, Vijay Mallya could be seen as a small fish at best. Though the Supreme Court ruling in December 2015 made it mandatory for all banks to reveal the names of the defaulters, so far, those banks, especially public sector banks who hold lion’s share of NPAs have been hesitant to disclose their names. The Reserve Bank of India also has not yet released the names of individual defaulters.

On the eve of demonetization, the Narendra Modi government had written off Rs. 1.14 lakh crore corporate loans owed to banks in the name of NPAs. Though Modi always preaches about transparency, his government has been reluctant to officially disclose the names of those corporate defaulters whose debt was written off. But the leading names among them are otherwise known to people as Ambani, Adani, Essar, Jindal, Mallya and so on.

Meanwhile, the report released by Credit Suisse in March 2015 has given some insight into the top ten defaulting corporate companies in India. The details of these ten are thus:

Reliance Group: The Ambani-led Reliance Group, the leading corporate giant is also stands as number one owing the banks Rs 1.25 lakh crore, the largest amount owed by any company.

Vedanta Group: Headquartered in London, Anil Aggarwal’s The Vedanta group was the Second-largest defaulter on the list, owing the banks nearly Rs 1.03 lakh crore.

Essar Group: In the beginning of 2015 for which data was prepared by Credit Suisse Essar ranks third in the list of defaulters with a debt worth Rs 1.01 lakh crore.

Adani Group: Founded by Gautam Adani, who is known to be very close to Prime Minister Modi, has defaulted on Rs 96,031 crore of the people’s money in banks.

Jaypee Group: This company that flourished in UP during Mayawati’s reign owed Rs 75,163 crore to the banks.

JSW Group: Founded by Jindal, this company has a debt of Rs 58,171 crore to banks on its balance sheet.

GMR Group: This company which was the contractor in building up the International Terminal in Delhi owed Rs 47,976 crore to the banks by March 2015.

Lanco Group: According to the Report, this corporate group owes Rs 47,102 crore the banks.

Videocon Group: This group owed the banks about Rs 45,405 crore.

GVK Group: The total amount of money owed by the company was Rs 33,933 crore in 2015.

Based on Credit Suisse report and other independent estimates, it was estimated that by the end of 2015 itself, the NPAs of public sector banks have crossed Rs. 11 lakh crore, which might be an underestimate. And 90 percent of these NPAs with banks was because of the above listed top ten corporate thugs. There has been no effort on the part of the government to confiscate this hard–earned money of the Indian people from the corporate, traitorous thugs. Some analysts said banks have reduced NPA levels through write-offs and restructuring such that no clear picture of bad loans emerges. More often, at the behest of the regime at the centre, re-financing facilities are offered to corporate defaulters which further worsen the financial position of banks. KC Chakrabarty former Deputy Governor of RBI has pointed out in 2015 that since 2000 Rs 400,000 crore write-offs have taken place. The repudiations made by Modi regime are in addition to them. All these immensely facilitate the loot of public wealth by various corporate groups. According to figures compiled by Care Ratings for The Indian Express,

NPAs or bad (or toxic- a phrase used in Western countries) loans have now shot up by 135 per cent in the last two years, despite the RBI announcing a host of restructuring schemes.

However, the Modi government and the CEOs of banks who are very lenient towards the corporate robber barons, have no such considerations in the case of agricultural loans. As is obvious, rural indebtedness is a systemic problem, and unlike the money-spinning corporate sector, the peasants are driven into the vicious circle of indebtedness and poverty from generation to generation. Since formal banking and peasant-friendly credit facilities are insufficient in the countryside, the peasants are forced to fall into the trap set by money lenders which ultimately end up in the forcible sale of the produce to the money lender himself. Usually, the poor and marginal peasants go to the banks as the last resort and the loan is often used not for cultivation but for performing extra –economic functions and other obligations including the repayment of loans taken from private financiers. While the payment of interest and repayment of principal to the money lenders become the first priority (and in the process the peasants lose their land also), peasants become chronic debtors to banks.

Over the years, the RBI has announced various schemes to deal with the issue of NPAs such as Strategic Debt Restructuring (SDR), Sustainable Structuring of Stressed Assets (SSSA), Asset Reconstruction, Corporate Debt Restructuring (CDR) and so on. To be precise, the real aim of these schemes announced in relation to corporate loans has been to hoodwink the public. There was no follow-up action to implement them. However, in recent years, in the guise of making the recovery of bank loans more stringent, the government has enacted the Insolvency and Bankruptcy Code (IBC) and SARFAESI (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest) Act and RDDBFI (Recovery of Debts due to Banks and Financial Institutions) have been amended. Further, six new Debt Recovery Tribunals (DRTs) have been established for improving recovery.

Among them the SARFAESI Act allows banks and other financial institutions to auction residential and commercial properties when borrowers default on their payments. This helps the banks to reduce their NPA by recovery and reconstruction. Under this Act, 64,519 properties were seized or taken possession off by the banks in 2015-16. True to the class character of the ruling regime, SARFAESI Act is now directed against the poor and pauperized marginal sections of society and under the cover of this Act mot coercive methods are inflicted on the people.

Today, the unholy nexus among the leading corporate thugs, the comprador political leadership and corrupt bureaucracy including the CEOs of public sector banks is plundering the public sector banks leaps and bounds and NPAs have become one of the major means of accumulation under corporatization. While this unhindered loot of public money is flourishing without any let up and corporate NPAs are galloping, the same nexus is ruthlessly unleashing the SARFAESI Act on the peasants, rural poor and subsistent sections who are forced to take agricultural and educational loans (in tandem with the transformation taking place in society, today education loans reportedly constitute around 20 percent of its NPAs!) from banks.

A recent Parliamentary Standing Committee, based on data has unequivocally shown that NPAs in the corporate sector are far higher than those in the agriculture and rural sector. But the corporate media are conspicuously silent on this. Often the whole process of loan recovery is outsourced to the very same corporate thugs, the biggest loan defaulters as is evidenced from the notorious deal between State Bank and Reliance giving the latter most coercive practices to recover loans on a commission basis.

The upshot of the argument is that Modi government like its predecessors while trying to explain way the NPAs brought about by corporate financial speculators as a casual thing, is bent on unleashing the most draconian measures on peasants for defaulting on loans taken from banks. 

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