CAG questions govt’s capital allocation to state-run banks
NEW DELHI: The Comptroller and Auditor General (CAG) has raised some queries on the capital allocation to state-run banks, seeking to know if due process was followed for the same.
In 2015, the government had announced a seven-pronged revamp plan, Indradhanush, for state-run banks that included a programme to deal with bad assets and promised capital infusion to the tune of Rs 70,000 crore over four years.
The capital allocation was to be done based on performance parameters, including greater efficiency, growth of both credit and deposits, and reduction in operational cost. The government infused Rs 25,000 crore in 19 public sector banks during 2015-16.
“There are some concerns (raised by CAG) on whether the process was ad hoc and that whether the norms were changed every year for capital allocation,” a senior government official told ET.
“These concerns are being addressed. There is no issue with the process followed in the last two years. The exercise (CAG audit) is being done for the capital allocated since the last five years,” the official said.
CAG did not reply to a questionnaire sent by ET. The government has been reluctant to give capital to banks that have performed poorly, reasoning capital should go to those who can use it best.
CAG AUDIT
The government is also not in favour of CAG audit of books of public sector banks. State-run lenders do no come under the ambit of the auditory body. They are overseen by the Reserve Bank of India. The government is of the view that such a process has already been initiated by the banking regulator, Reserve Bank of India, through its asset quality review (AQR) process.
“The current focus is on resolving the bad loans so that credit growth picks up. There are enough mechanisms in place to deal with wilful defaulters,” said a finance ministry official.
Bad loans of state-run banks grew more than Rs 1 lakh crore in the first nine months of last fiscal to Rs 6 lakh crore by December 31, 2016.
Earlier this month, finance minister Arun Jaitley had indicated setting up more oversight committees, as initiated by the RBI for faster settlement of such cases.
There is, however, a view that if the banks are audited by an independent body like CAG, a clearer picture would merge on the non-performing assets. “Such an audit would have been of immense benefit as it would have addressed the issues on suspect lending and banks inaction on wilful defaulters,” said the government official quoted first.
In 2015, the government had announced a seven-pronged revamp plan, Indradhanush, for state-run banks that included a programme to deal with bad assets and promised capital infusion to the tune of Rs 70,000 crore over four years.
The capital allocation was to be done based on performance parameters, including greater efficiency, growth of both credit and deposits, and reduction in operational cost. The government infused Rs 25,000 crore in 19 public sector banks during 2015-16.
“There are some concerns (raised by CAG) on whether the process was ad hoc and that whether the norms were changed every year for capital allocation,” a senior government official told ET.
“These concerns are being addressed. There is no issue with the process followed in the last two years. The exercise (CAG audit) is being done for the capital allocated since the last five years,” the official said.
CAG did not reply to a questionnaire sent by ET. The government has been reluctant to give capital to banks that have performed poorly, reasoning capital should go to those who can use it best.
CAG AUDIT
The government is also not in favour of CAG audit of books of public sector banks. State-run lenders do no come under the ambit of the auditory body. They are overseen by the Reserve Bank of India. The government is of the view that such a process has already been initiated by the banking regulator, Reserve Bank of India, through its asset quality review (AQR) process.
“The current focus is on resolving the bad loans so that credit growth picks up. There are enough mechanisms in place to deal with wilful defaulters,” said a finance ministry official.
Bad loans of state-run banks grew more than Rs 1 lakh crore in the first nine months of last fiscal to Rs 6 lakh crore by December 31, 2016.
Earlier this month, finance minister Arun Jaitley had indicated setting up more oversight committees, as initiated by the RBI for faster settlement of such cases.
There is, however, a view that if the banks are audited by an independent body like CAG, a clearer picture would merge on the non-performing assets. “Such an audit would have been of immense benefit as it would have addressed the issues on suspect lending and banks inaction on wilful defaulters,” said the government official quoted first.
