Union Finance Minister Arun Jaitley Thursday said the government will do whatever it takes to ensure that bank loans are repaid by defaulters.
Without naming Kingfisher Airlines chief Vijay Mallya, Jaitley told a gathering of top bankers and chief executives at the FE Best Banks Awards function in Mumbai that the government had already taken action in sectors such as steel and construction, but legal action will be taken if needed in the case of wilful defaulters evading Indian authorities.
“If you (wilful defaulters) think you can just physically swim across the shores and avoid paying debts, then I don’t think the system will entirely ignore this,” he said.
Jaitley said once the chief of the National Investment and Infrastructure Fund (NIIF) takes over in the first week of September, a decision will be taken on whether a stressed asset fund — which could buy over bad loans of banks — should be created. “We have already had arrangements being entered into between the NIIF and various potential contributors to the NIIF. Even across the world, there is a great amount of enthusiasm,” he said.
With labours union threatening a strike on Friday, Jaitley did not go into the specifics of privatisation but said while the government was shutting down loss-making PSUs, decisions on others such as BSNL would have to come from the respective ministries. He said instead of selling an entire company, it might be possible to merely segregate assets and divest these so as to realise their value.
“One option is to segregate the assets and divest only an asset so that you can have recycling of the assets itself in order to have more value for the government and that value itself can be used for some other purpose,” Jaitley said.
He underlined the importance of monitoring a contract by putting in a mechanism to give early warning on potential problems. “We have just notified a hike in minimum wages, and if this affects the viability of a project, the promoter can come to this board and ask for a solution before the loan turns bad,” he said.
Rather than blindly focusing on privatisation as a mantra, Jaitley said it was important to ensure that public sector managers — including banks — were given sufficient autonomy to operate without the CAG, CBI and CVC getting after them. While this has been done through the Banks Board Bureau (BBB) in the case of banks, the changes and early passage of the Prevention of Corruption Act would also insulate them.
Commenting on Brexit and the narrative around the upcoming presidential elections in the United States, Jaitley said it will be a big challenge for the global economy if the developed world becomes more protectionist. “I think the worry today is the developed world becoming more protectionist. One can only hope that President Obama had said that the positions which are taken in elections are significantly different from the positions when you are voted to power and are in government. Therefore, in government, there is a lot more moderation that gets into people.”
On the goods and services tax, Jaitley said a majority of states have approved GST within 21 days of Parliament clearing it but certain key issues still need to be sorted out.
“So the fact that every day, one or two states are approving it speaks about the enthusiasm of the states itself. But there is still some work to be done. We need to sort out certain issues like fixation of the rate, how exemptions apparatus will operate etc. As far as the rate is concerned, it has to be a fair rate. The time schedule (of GST implementation) will depend on how quickly we can negotiate and come to a conclusion of these basic facts,” he said.
Viveck Goenka, Chairman of The Express Group, said the FE awards have become a benchmark in the industry. “We are here to celebrate the finest in banking,” he said, adding that there is disruptive technology challenging the banking landscape at present.