New Delhi, June 4 (IANS) Members of a Parliamentary Committee on Monday grilled top executives of public sector banks on the issue of non-performing assets as well as the huge fraud involving diamantaire Nirav Modi and Punjab National Bank and demanded that the banks come out with a road map to tackle the problem of bad loans stalking the financial sector.

At a meeting of the panel here, the members also posed questions to the banking sector representatives about bank recapitalisation and RBI restrictions in this regard.

SBI Chairman Rajnish Kumar and Punjab National Bank Chairman Sunil Mehta besides representatives of Indian Banks’ Association were among those who attended the meeting. Former Prime Minister Manmohan Singh was among the panel members.

Sources said they were asked about the challenges they faced and changes required to prevent frauds.

Some Committee members said there cannot be one category and there should be classification in terms of willful defaulters and non-willful defaulters.

The members said that NPAs can arise due to “government inactiveness” and other factors and there was a need to make such distinction. The banks were asked to come out with a road map with redefining of NPAs.

Sources said the PNB chief was asked about the multi-crore fraud involving Nirav Modi.

He is learnt to have told the members that it was related “to a branch” and was not a failure of the entire bank.

An opposition member is learnt to have responded by saying that beyond a particular amount, the bank boards get involved and the process of sanctioning loans goes into the fast sanction system. He said the issue was not mere working of the banks but their governance.

The sources said bank officials told the members that scams were being dealt with separately and did not represent a systems failure.

The officials also said that there has not been a lack of confidence among people in relation to the public sector banks.

The meeting was held almost a week before the Reserve Bank of India Governor Urjit Patel is scheduled to appear before the Committee on issues related to the banking sector including NPAs and stressed assets.

Sources said the issue of merger of banks also came up at the meeting with some members suggesting the need to be extra careful as it involved “different cultures” besides “chemistry”.

They said the proposal of merger of different banks was not the same as merger of associates of State Bank of India.

A member is also learnt to have raised issues concerning autonomy of IBA. He is learnt to have compared the situation with “autonomy” of oil marketing companies, saying they had raised price of petroleum products at a time chosen by the government.

He asked if the banking industry was consulted on major decisions taken by the government and if people were aware of the situation. He is leant to have said independent directors are supposed to be there to protect minority shareholders and they were sometimes relatives of the promoters.

A member also asked about the controversy over conflict of interest in the Rs 3,250 crore loan given by the ICICI Bank to the Videocon Group in 2012. The controlling shareholder of Videocon Group co-founded a separate company with the spouse of ICICI’s CEO Chanda Kochhar. A significant portion of the loan has since become non-performing.

Sources said banking industry representatives would send detailed answers to questions raised at the meeting. They expressed hope that NPA situation will improve next year.

According to sources, during his appearance before the panel, Patel is likely to be asked about the bank frauds, including the Nirav Modi case, and better regulation of banks.

Patel said earlier this year that the RBI’s regulatory powers over PSBs were weaker than those over the private sector banks.

–IANS
ps-sid/vsc/him/