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SC issues notices to government, RBI over bank scams

The Supreme Court on Wednesday issued notices on a public interest petition seeking direction for review of banking laws and the banking system in the country in view of the ever-increasing bank frauds and scams involving more than Rs 430 billion by now.

Notices were issued by a three-judge bench comprising Chief Justice M M Punchhi, Justices M Srinivasan and S Rajendra Babu to the Union of India and the Reserve Bank of India.

The petition, filed by Common Cause, a registered society, urged the court to direct the Union of India and the RBI to frame rules and regulations for the speedy recovery of loans and interests thereon.

The petition also prayed for the setting up of a fraud detecting mechanism to save banks from undergoing huge losses.

The petition alleged that during the past few years, there had apparently been a laxity in effecting supervision of public sector and private sector banks, particularly in the matter of advancing loans to industry, trade and for other purposes and recovery of loans.

These non-recovered loans, the petition said, had been given the euphemistic appellation of ''non-performing assets''.

It was alleged in the petition that according to reports appearing in the press, which had not been contradicted, the non-performing assets of the banks had accumulated to the astounding figure of Rs 435.77 billion. The amount would go up by four to five times in case the interest accrued thereon was included, the petition said.

It was further alleged in the petition that attempts were continued to be made by the ministry of finance and the RBI to play down the figure.

This enormous accumulation of non-performing assets has taken place because of the 1980 policy of the government and the RBI to encourage banks to liberally advance loans to the needy and weaker sections, the petition said.

UNI