Need to have criminal justice system that protects bonafide banking decisions: Uday Kotak

PTI, Nov 3, 2021, 10:43 AM IST

Two days after former SBI chairman Pratip Chaudhuri was arrested by the Rajasthan police, banker Uday Kotak has called for a more efficient criminal justice system that protects bonafide commercial/banking decisions.

Chaudhuri was arrested from his Delhi home by the Jaisalmer police on Sunday for his alleged role in crippled Rs 200 crore hotel project in the city sold for Rs 25 crore to Alchemist ARC in March 2014. Chaudhuri has been a director on the board of the ARC since his retirement in September 2013.

“I don’t know anything more than what I have read from the newspapers this morning. And based on what I have read, what I feel is that we really need to have a criminal justice system that protects bonafide banking/lending decisions,” Kotak said briefly on the development while addressing the press on the third year of IL&FS debt resolution as the chairman of the government-appointed board.

The Jaisalmer police accuse Chaudhuri of being a party to the sale of a hotel project in the city worth Rs 200 crore at a much lower price of Rs 25 crore after declaring it as non-performing asset to Alchemist. The project was part funded by SBI when he was the chairman. Interestingly, the development came on a day when the Centre issued new guidelines to protect genuine banking decisions.

Jaisalmer police said a non-bailable warrant was issued against Chaudhuri on orders of the city court and he was arrested from his Delhi residence on Sunday and bought to Jaisalmer. This is a case of irregularity and fraud and his bail plea was rejected by the court and was sent to judicial custody for 14 days, the police said.

Meanwhile, SBI on Monday clarified that the said hotel project was sold to an ARC with due process in March 2014 after the retirement of Chaudhuri in September 2013 and he joined the board only in October 2014– well after the loan sale to ARC. Garh Rajwada was a hotel project in Jaisalmer, financed by SBI in 2007. The project remained incomplete for over three years and the key promoter passed away in between in April 2010.

The account slipped into NPA in June 2010. Various steps taken by the bank for completion of the project as well as recovery of bank’s dues didn’t yield the desired results. Hence as part of the recovery efforts, the dues were assigned to an Alchemist ARC for recovery in March 2014. This sale was done through a laid down process as per the policy of the bank, the bank said.

“As recovery efforts failed, approvals for sale to ARC were taken in January 2014, and the same was completed in March 2014. It transpires now that the borrower had initially filed an FIR with the state police against the sale of asset to ARC,” SBI said, adding the bank is not made a party to the case yet. The bank added that all the directors of the ARC, including Chaudhuri, who joined its board in October 2014, have been named in the case.

Being called a ‘staff accountability framework’ to protect honest bank employees from being penalised in case bonafide decisions involving loans up to Rs 50 crore go wrong. The framework will cover only genuine decisions and not those involving malfeasance or malafide intentions, the ministry said, adding banks must initiate and complete staff accountability exercise within six months from the date of classification of the account as an NPA, the ministry said.

The fear of CBI, CVC and CAG has often prevented bankers from taking commercial decisions which have probability of going bad. The government and other stakeholders are taking steps to dispel the fears. The framework, dated October 29, gives detailed standard operating procedures to be followed for different category of NPAs, depending on the NPAs which are classified into three groups– to Rs 10 lakh, under Rs 1 crore, and above Rs 1 crore and up to Rs 50 crore.

Public sector banks have been asked to implement common staff accountability policies for loan accounts of up to Rs 50 crore that turn into non-performing assets from April 1, 2022. These new rules do not apply to fraud accounts.