Congress leader Jairam Ramesh raises questions on RBI for changing its's rules on wilful defaulters

Sharpening his attacks on Prime Minister Narendra Modi, Senior Congress leader Jairam Ramesh, has asked the Reserve Bank of India (RBI) why it changed its own rules pertaining to 'wilful defaulters' and 'frauds'.

Ramesh, who represents Karnataka in parliament, also alleged that Prime Minister Narendra Modi has always bent and changed rules to help his friends in a few large business groups.

''The most powerful example of this is, of course, the Adani Group, on which we have already posed 100 questions to the PM in our HAHK (Hum Adani ke Hain Kaun) series. The latest example is a clean chit to all wilful defaulters and frauds who have run away with public money,'' he said in an official statement on June 14. 

The RBI must clarify why it has changed it’s own rules with regards to ‘wilful defaulters’ and ‘frauds’.

This despite the All India Bank Officers’ Confederation and the All India Bank Employees Association clearly stating this move would “erode public trust in the banking… pic.twitter.com/pINsFMMn5D

— Jairam Ramesh (@Jairam_Ramesh) June 14, 2023

As per the Congress leader, on 8 June 2023, the Reserve Bank of India (RBI) issued instructions under a "Framework for Compromise Settlements and Technical Write-offs" that allowed banks and other financial entities to "undertake compromise settlements or technical write-offs in respect of accounts categorized as wilful defaulters or fraud without prejudice to the criminal proceeding underway against such debtors." 

''These accounts will be permitted to take fresh loans after a 12-month "cooling period," Ramesh quoted the instruction by RBI as saying. 

Ramesh further claimed that the All India Bank Officers' Confederation and the All India Bank Employees Association, which represent 6 lakh bank employees, have both opposed this policy. 

''They pointed out that it will not only lead to erosion of public trust in the banking Sector but also undermine the confidence of depositors. They warn that such leniency serves to perpetuate a culture of non-compliance and moral hazard, leaving banks and their employees bearing the brunt of the losses," he claimed.

Ramesh further opined that the banker's bank knows well the dangers of its move, adding, ''Two years ago, it had clearly stated that wilful defaulters would not be allowed to access capital markets or take fresh loans''. 

''As recently as 29 May 2023, the RBI governor warned about the many ways in which defaulters as fraudsters conceal the true status of distressed loans. Will the RBI clarify if the Modi government has pressurized it to take this U-turn,'' asked Ramesh.

Further while giving some data, Ramesh revealed that Indians have paid a high price for fraud and wilful defaults as banks wrote off loans worth 710 lakh crore between 2017-18 and 2021-22. 

''The recovery rate for these loans is an abysmal 13 per cent, which means that only 71 is being recovered out of every 78 written off. The top 50 wilful defaulters, a list headed by PM Modi's friend Mehul Choksi, owe a substantial 792,570 crore (as on 31 March 2022). Banking frauds have risen 17-fold under the Modi government, from 334,993 crore in 2005-14 to 75.89 lakh crore in 2015-23,'' he added.

Ramesh also claimed that the honest borrowers - farmers, small and medium enterprises, and middle-class salaried workers are groaning under relentless EMIs and they are never given a chance to renegotiate their loans.

''Yet the Modi government has now provided fraudsters and wilful defaulters such as Nirav Modi, Mehul Choksi, and Vijay Mallya a path to rehabilitation. While wealthy financiers of the BJP are given every undeserved convenience, honest Indians struggle to pay their loans. This reveals the true nature of this suit-boot-loot-jhoot sarkar,'' he said.

He said that the RBI must immediately repeal its instructions and prevent banks from settling with wilful defaulters and fraudsters.

Besides this, the RBI must clarify why it thought these instructions were necessary at this time, despite its repeated warnings and instructions to the contrary,

''The RBI must reveal if there was any pressure from the Modi government to issue these instructions,'' the statement concluded.

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