Congress Criticizes RBI for Allowing Compromise Settlement of Wilful Defaults
14-06-2023: The Congress party has launched an attack on the central government, specifically targeting the Reserve Bank of India (RBI), for its decision to permit banks to engage in compromise settlements regarding fraud accounts and wilful defaults. Congress General Secretary Jairam Ramesh has demanded immediate repeal of the RBI’s instructions and called for transparency regarding any potential government pressure to issue the notification.
Ramesh sought clarification from the RBI on the reasons behind changing its own rules regarding wilful defaulters and frauds. He accused Prime Minister Narendra Modi of favoring certain large business groups and cited the Adani Group as an example, alleging that special treatment has been provided to them. Ramesh claimed that the latest move by the RBI provides a “clean chit” to all those who have committed wilful defaults and frauds, resulting in a loss of public funds.
During a press conference held at the All India Congress Committee (AICC) headquarters, AICC Secretary Vineet Punia and Congress leader Amitabh Dubey highlighted the significant financial burden imposed on the country due to frauds and wilful defaults. They questioned the RBI’s sudden policy change, as just two years ago, the RBI clearly stated that wilful defaulters would be barred from accessing capital markets or obtaining fresh loans. Punia and Dubey expressed concern that fraudsters and wilful defaulters would now face minimal consequences while ordinary citizens continue to struggle to meet their loan obligations.
Ramesh pointed out that on June 8, the RBI issued instructions under the “Framework for Compromise Settlements and Technical Write-offs,” which allow banks and financial entities to settle accounts categorized as wilful defaulters or frauds through compromise or technical write-offs. He emphasized that after a 12-month “cooling period,” these accounts would be eligible for fresh loans. Ramesh also highlighted the opposition to this policy from the All India Bank Officers’ Confederation and the All India Bank Employees Association, who raised concerns about eroding public trust and the burden placed on banks and their employees.
Ramesh questioned whether the Modi government had pressured the RBI to reverse its stance, citing a warning from the RBI governor about defaulters and fraudsters concealing the true status of distressed loans. He claimed that Indian citizens have paid a high price for fraud and wilful defaults, with loans worth 10 lakh crore being written off between 2017-18 and 2021-22. Ramesh alleged that the recovery rate for these loans is a mere 13%, and he accused the top 50 wilful defaulters, including Mehul Choksi, a close associate of PM Modi, of owing a substantial amount.
According to Ramesh, banking frauds have increased significantly under the Modi government, rising from Rs 34.993 crore during 2005-14 to 5.89 lakh crore in 2015-23. He criticized the government for providing a path to rehabilitation for fraudsters and wilful defaulters like Nirav Modi, Mehul Choksi, and Vijay Mallya while burdening honest borrowers, such as farmers, small and medium enterprises, and salaried workers, with relentless EMIs.
The Congress party demands the immediate repeal of the RBI’s instructions and urges the prevention of compromise settlements with wilful defaulters and fraudsters. Ramesh called on the RBI to explain why it deemed these instructions necessary, despite issuing repeated warnings and instructions to the contrary. He also urged the RBI to disclose whether any pressure was exerted by the Modi government in issuing these instructions.
During the press conference, Punia and Dubey criticized the recent move as a brazen way of rewarding those who have looted the country’s wealth while punishing law-abiding citizens who faithfully repay their debts. They expressed concern that the RBI’s instructions would only lead to further wilful defaults, emphasizing that the Modi government is rewarding fraudsters while penalizing honest taxpayers in the country.
