By hiding names of wilful loan defaulters, govt hurting genuine businesses
It is no secret that the major problem facing the Indian economy's at the moment is of non-performing assets in the banking sector. The sooner the government manages to resolve the issue, the faster the sector would recover, which would then percolate to other industries.
The government as well as the Reserve Bank of India recognise this, and have categorically referred to this problem time and again. Yet, the way they have tried to resolve the issue so far does not reflect the will to deal with the issue transparently.
On 17 April, the Central government handed over to the Supreme Court a list of corporate entities which owe more than Rs 500 crore each to banks.
The Indian Express reported that the 'total amount of default in repaying loans is Rs 5 lakh crore in 70,000 cases of non-payment'.
Yet, the government does not want the apex court to disclose the names of the biggest loan defaulters in the country.
Need for political solution
The Economic Survey for 2016-17, presented by Chief Economic Advisor Arvind Subramanian earlier this year, acknowledges that there are cases where debt repayment problems have been caused by diversion of funds by the promoters, but a major chunk of the problem has been caused by unexpected changes in the economic environment of the country, and growth rate assumptions going wrong.
Subramanian himself said the issue of NPAs needs a political solution more than an economic loan, as a large number of loans to large corporates would have to be written off to pave the way for cleaning of the balance sheets of the corporates as well as banks to focus on new projects that require loans.
The Indian economy does require this kind of a solution at the moment. But who will decide which corporate house will get a write-off and whose promoters will be pulled up for misusing the loans given to them?
A political decision that seeks to write-off loans worth Rs 5 lakh crore needs absolute transparency from the government, so that the public is made aware of the reasons for such a decision being taken.
Remember, RBI Governor Urjit Patel recently opposed a loan waiver given by the Uttar Pradesh government to the state's distressed farmers.
Help the ones who mean business
In such a scenario, by hiding the names of defaulters who siphoned off the loans issued for specific projects, the government is only ensuring that there would never be a space for helping out the genuine industries, which were done in by the changed economic situation in the country.
Credit growth in the banking sector has fallen to a 60-year low of 5.1%. The situation is alarming and requires serious remedy from the government, as it is impossible to steer the economic growth only on the basis of government spending in the long run.
The private sector must be in a position to invest in new, economically viable projects, to create jobs in the country.
And to ensure this, the government must take the harsh step of disclosing the names of corporates who are suspected of diversion of funds.
This move will bring out a lot of Vijay Mallya-like cases in public, but it will ensure that those who mean real business get a breather, and get back to creating wealth in the country.