Bad loans: Over three dozen CAs under RBI lens

Sources said the Reserve Bank of India (RBI) is looking into the role of around 35 to 40 chartered accountants in loan defaults by various companies

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New Delhi: The Reserve Bank of India is grappling with high bad loans menace in the Indian banking system which is even comparable to PIIGS nations.  In a major effort to control bad loan menace, more than three dozen chartered accountants are under the scanner of RBI for allegedly conniving with promoters in defaulting as well as restructuring the stressed assets, sources said.

Sources said the Reserve Bank of India (RBI) is looking into the role of around 35 to 40 chartered accountants in loan defaults by various companies.

The regulator is looking to ascertain whether these chartered accountants helped the entities in any illegal manner causing deliberate defaults and subsequently assisting them in restructuring the dud assets, they added.

At a time when more number of companies with stressed assets are coming under the Insolvency and Bankruptcy Code, the central bank is also looking at the role of various key personnel associated with such entities.

The RBI lens on chartered accountants for suspected illegal activities with defaulting companies also come at a time when a substantial number of stressed assets are being taken up under the insolvency resolution mechanism.

The 9.85% ratio of bad loans in banks has put India in the group of those nations that have very high non performing assets (NPAs). The only major countries with similar ratios are the troubled EU nations: Portugal, Italy, Ireland, Greece and Spain — commonly referred to as PIIGS.

According to a research report by rating agency CARE, India’s NPA ratio — which excludes restructured assets that are around 2% higher than NPA — is one of the highest in the group of ‘high-NPA’ nations. The only countries with a higher NPA than India are Portugal, Italy, Ireland and Greece. Even among the troubled PIIGS, Spain has a lesser ratio of bad loans compared to India.

The NPA woes in the banking system have been further highlighted with the over Rs 13,000 crore scam at Punjab National Bank by diamond merchants Nirav Modi and Mehul Choksi. A high-level panel of the ICAI is already looking into the PNB fraud to understand the systemic issues involved and suggest remedial measures.

According to officials, around Rs 4.5 lakh crore worth of non-performing assets are under the insolvency resolution process. The Code, which provides for a market-determined and time-bound resolution framework, seeks to maximise the value of stressed assets rather than resorting to liquidation.

The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy. The bankruptcy code is a one-stop solution for resolving insolvencies which at present is a long process and does not offer an economically viable arrangement.