Has Modi government really waived loans of capitalists? This could be the truth

In the wake of allegations that Narendra Modigovernment has waived the loans of leading capitalists of the country by opposition parties and critics, Union Finance Minister Arun Jaitley has called it a “fiction” and also come up with an article to debunk the rumours, which started after the Centre decided to pump in over Rs 2 lakh crore to revitalise the banking sector. Last year, some opposition leaders including Delhi CM Arvind Kejriwal had alleged that PM Modi demonetised old Rs 500 and Rs 1000 notes in a bid to waive the loans of big businesses while putting the poor people of the country in trouble.

When the bank recapitalisation decision was announced recently, opposition leaders alleged what they had feared came true. However, the allegations were denied by the Centre. Now, in an article, Jaitley has explained as to how the allegation against bank recapitalisation is just “fiction”. In an article titled “The Fiction of Loan Waiver to Capitalists”, Jaitley made the following points, saying “Time has come for the nation to be apprised of facts in this regard.”

• Jaitley said that during 2010‐11 to 2013‐14, the then government provided banks an amount of Rs. 44,000 crore for recapitalisation. he asked, “Was that also for waiving loans of capitalists?”
• According to the Finance Minister, Public Sector Banks had disbursed “disproportionate sums of loans” to industries between 2008 and 2014. In the period, “the gross advances of Public Sector Banks increased from about Rs. 34,00,000 crore. Despite repayment not being regular on these, through relaxation in loan classification, banks continued to keep defaulters as non‐NPA account holders by restructuring them ” and “losses of banks and their precarious position was kept under the carpet.”
• Jaitley said the UPA government, with the help of relaxation by banks in loan classification, kept defaulters as non‐NPA account holders. The loans were restructured and loss to banks was kept hidden.
• Modi government’s took decisions to break the nexus. “Insolvency and Bankruptcy Code was enacted, and by amending it, in respect of companies whose money was not returned to the banks, decision was taken that the debtors concerned would not be allowed to participate in the business of such companies,” Jaitley wrote.
• On Bank recapitalisation decision, Jaitley said it was done “so that Public Sector Banks become strong and capable of contributing to nation’s development.” That these banks may become “mazboot, i.e., strong, rather than mazboor, i.e., hard‐pressed,” he said.
• And Asset Quality Review was carried out for clean and fully provisioned balance‐sheets in 2015. It revealed high NPA of Public Sector Banks, increased from Rs. 2,78,000 crore in March 2015 to Rs. 7,33,000 crore in June 2017. Jaitley said, “those loans, of about Rs. 4,54,466 crore, which were actually fit to be NPA and were under the carpet, were recognised after intensive scrutiny.”
• Were loans of capitalists waived? Jaitley said ‘no’.  He wrote, “Government has not waived any loans of big NPA defaulters.” Instead, under new Insolvency and Bankruptcy Code, “cases have been instituted in the National Company Law Tribunal (NCLT) for timebound recovery from 12 largest defaulters in six to nine months, in NPA cases of Rs. 1,75,000 crore.” The FM said that cases for recovery of NPA dues from the assets of big defaulters are under way at various stages.
• Wilful defaulters barred: Jaitley said that through an ordinance this week, Modi government has barred wilful defaulters and persons associated with NPA accounts from participating in the process under way in NCLT.