Govt moots oversight body for debt recast

Mumbai: The finance ministry has asked banks to set up an oversight mechanism that will give independent opinions on debt restructuring proposals. The panel would make it easier for banks to decide on proposals from distressed borrowers in an atmosphere where there is fear to take decisions. 

    "We have asked Indian Banks Association to consider as an institution an independent oversight mechanism for debt restructuring. Considering that there are cases running into huge amounts banks have to be careful," said Rajiv Takru, secretary, financial services. He added that banks could choose the cases to be recommended to the panel and could also decide on accepting or rejecting the recommendations. He said that there would not be any government official or banker on the panel but impeccable members, including experts from legal, investigation and financial fields. In a question and answer session with newspersons, Takru spoke on a host of issues. Excerpts: 
On probe into frauds in farm loan waivers 
We had asked banks to review each of the 3.4 crore cases where loan waiver were granted after the CAG detected irregularities in a sample study. Banks discovered few cases where benefits were denied to deserving and few cases where benefits were given to wrong people. In all the cases where benefits were given to the wrong people, banks have been asked to initiate recovery proceedings and all officers\employees who sanctioned improper cases should be issued show-cause notice. Also as each case was pre-audited by a chartered accountant, banks have been told to issue notices to CAs who have wrongly certified cases and refer them to the ICAI. 
On RBI autonomy 
The provision under Section VII(1) of RBI Act 1935 Act gives the government powers to give direction to RBI. In these 80 years, no government, including the British government, have given any directions to RBI. We have no wish to change history. If there is one thing the government has zealously guarded, it is the autonomy of RBI, in spite of very difficult political conditions, never has the government contemplated giving directions to RBI. There is no reason for anyone to believe that extra constitutional influence would be used over them even when we have not used even the constitutional influence. 
Cobrapost fallout 
How can insurance companies directly incentivize bank employees? The agreement was between an insurance company and a bank. I don't understand how can an insurer pay money to a bank employee. In private banks, the system allowed such payments transparently. 
New bank licences 
New banks are being floated for increasing coverage. We want to increase coverage because our present coverage is only 37%. There are huge underbanked and unbanked areas. There are places where you travel hundreds of km and do not see a single branch. Any entity which comes to seek a bank licence has to come with open eyes.

Rajiv Takru