P Chidambaram backs bankers over bad loans

By ET Bureau | 15 Nov, 2013, 01.56PM IST

MUMBAI: Finance minister P Chidambaram strongly backed bankers who find themselves under a cloud through no fault of their own as loans increasingly turn bad amid a slowing of the economy. 

"Banking is a business and lenders take decisions which turn out to be wrong,'' Chidambaram said at the banking conference Bancon 2013 in Mumbai on Friday. "At times, some decisions are taken. But a poor or a wrong decision does not mean it is a malicious decision. But if authorities question these decisions that would be the most dangerous thing to do." 

The finance minister's declaration of support triggered a burst of applause from the audience. Chidambaram's backing comes as loans worth lakhs of crores of rupees are turning bad or being restructured, leading to accusations of favouritism or of bankers conniving with promoters to siphon off funds. Earlier this year, a CBI official had said that lenders should be questioned for the rise in bad loans, unnerving banking officials. 

The government will defend bank employees from agencies such as the Central Vigilance Commission and the Central Bureau of Investigation over such loan approvals. 

"As long as you take decisions based on appropriate process and follow procedures and (these are) based on facts available at that point of time and you exercise best judgment we will defend you," Chidambaram said. 

Net non-performing assets of 40 listed banks rose 38% in the first six months to Rs 1.28 lakh crore from a year earlier, according to data from NPAsource.com. 

While the minister backed banks "holding hands" of companies facing difficulties due to circumstances beyond their control, wilful defaulters should not be spared, he said. 

The central bank has prescribed strict guidelines for restructuring and Reserve Bank of IndiaGovenor Raghuram Rajan has said that promoters "do not have a divine right" to continue after running their businesses into the ground.