New Delhi, Jan 25,2023: The RBI has told the Supreme Court that it has accepted the recommendations of a high-level committee that list of defaulters must be published by banks on their websites, where either the defaulters’ name is already in the public domain or their secured assets are possessed under the Sarfaesi Act.

The RBI, in a written response, said: “Reserve Bank’s resolute efforts have resulted in material decline in the NPAs of the banking system.”

It added that the recently-issued Financial Stability Report of the Reserve Bank on December 29, 2022 indicates that the gross non-performing assets (GNPA) ratio of banks has been steadily trending down to a seven-year low of 5 per cent in September 2022, while net non-performing assets (NNPA) have dropped to a ten-year low of 1.3 per cent of total loans.

“The Reserve Bank continues to monitor the situation and would assure to take prudent measures in discharge of its statutory mandate, to ensure a sound and resilient financial system, in the interest of all the stakeholders,” it added.

Advocates Prashant Bhushan and Pranav Sachdeva, representing NGO Centre for Public Interest Litigation, alleged loans were given at the behest of politicians. The apex court had asked the banking regulator to respond to the allegations that despite bank accounts of many big companies having been declared as ‘fraud’, lenders still dither in reporting such matters to either police or the CBI.

In the affidavit, the RBI further contended that necessary instructions are being issued mandating banks to examine and take a formal view on classifying an account as a case of wilful default, within 60 days of the account becoming an NPA (applicable for exposures greater than Rs 50 crore).

“Issuance of directions governing publication of the list of defaulters by banks wherever recovery action is required to be in public domain,” it added.

The RBI said even directions mandating the Trust and Retention Accounts (TRA) for all types of consortium lending are being issued. It further added that to prevent the diversion of funds by unscrupulous borrowers, which was also the rationale behind the committee’s recommendation of mandating TRA accounts, the measures essentially aimed at addressing the growing menace of NPAs in the banking system were taken.

On Wednesday, a bench headed by Justice Sanjay Kishan Kaul gave a four-weeks’ time to RBI to inform on the steps it can take as the regulator qua the committee’s recommendations to tackle bad loans.

The apex court is hearing a case connected with writing off thousands of crores of loans by lenders. In December last year, the court had asked the government and the RBI to submit an affidavit explaining why the lenders should not file criminal cases against loan defaulters and why the recommendations of an expert panel on banking reforms have yet to be implemented.