Go after big fish if concerned about NPAs: Supreme Court to PSBs

Go after big fish if concerned about NPAs: Supreme Court to PSBs

The bench, which also included justices MR Shah and Hima Kohli, was hearing an appeal by Canara Bank against a judgment of the Madras high court in March this year.

“You should focus on catching big fish. If you are really concerned about rising NPAs (non-performing assets) of the public sector banks, concentrate on big corporate debtors...not on such small loanees,” a bench, headed by Justice Dhananjaya Y Chandrachud, told Canara Bank.

The Supreme Court, on Tuesday, said public sector banks should focus their energy on recovering loans from “big fish” and “big corporate debtors” instead of running after those who have petty loans of a few thousand rupees.

“You should focus on catching big fish. If you are really concerned about rising NPAs (non-performing assets) of the public sector banks, concentrate on big corporate debtors...not on such small loanees,” a bench, headed by Justice Dhananjaya Y Chandrachud, told Canara Bank.

Loans are deemed non-performing once they are left unpaid for at least 90 days beyond the due date and borrowers are likely to default on these debts.

The bench, which also included justices MR Shah and Hima Kohli, was hearing an appeal by Canara Bank against a judgment of the Madras high court in March this year.

The high court had repelled an attempt by the public sector bank to hold a social service society from Tiruchirapalli, Tamil Nadu, liable for repaying an amount of ₹48.8 lakh, which was given to 1,540 individuals as loans in 1994-95. The high court had held that Canara Bank cannot recover its outstanding loan from the society’s fixed deposit since there was no formal contract or express agreement of recovery from the society in case of failure by the borrowers to repay the loans.

Representing the bank, senior advocate Dhruv Mehta argued before the top court that the Tiruchirapalli Multipurpose Social Service Society gave letters of guarantee that they will assure repayment of loans from the borrowers and that it was only on this assurance, the amounts were released.

But the bench noted that the loan was given by the bank under the DIR scheme to financially assist low-income groups. “These amounts were given to those involved in small farming, poultry, dairy, or to tradesmen and artisans. These are marginalised sections...some of them cannot even pay ₹10 for their photos on these forms. And the society, admittedly, helped you to identify these people. Why are you now going after the society?” the bench asked Mehta.

The bench added: “Giving loans to certain sections of society is also a social function. It is not only an economic function. You should also bear a moral responsibility.”

At this, Mehta replied that the banks were already suffering from the problem of NPAs and that recoveries had to be made to tide over it.

The court, however, retorted: “These are not the people to go after. You should go after the big fish. Canara Bank should not come in appeal against a society such as this.”

Mehta said that the bank has come in an appeal since a petition under Article 136 (special leave petition with wide discretionary power) is a ‘Brahmastra’.

“The Constitution has entrusted us with this Brahmastra only to make sure we use this only in suitable cases. And this is not the one,” said the bench, rejecting Canara Bank’s appeal.

It also upheld the high court order, stating that the bank should desist from contesting a matter like this and should instead channelise its energy and resources on better cases.