RBI formulate directives for PSU banks to get CBI nod for settlement of bad loans

For the one-time settlements of bad loans where criminal proceedings are underway the Reserve Bank of India (RBI) will soon issue new directives. Under these directives RBI has made it compulsory for all the public sector banks to attain clearance from the Central Bureau of Investigation (CBI) in bad loan cases involving criminal proceedings.

According to RBI sources, the central bank is ready with the new directive following a CBI proposal to this effect.

The sources informed few instances have come in the lime light where CBI had carried out prosecution against a company or an individual and it was found that those involved in bad loans had already made one-time settlements with their banks and got in writing from the lenders that all criminal proceedings against them had been withdrawn.

In one of such case, CBI had prosecuted a businessman for fake while obtaining loans from a public sector bank. Later, on investigation the agency found in the Supreme Court that the bank had made a one-time settlement for Rs 400 crore against Rs 525 crore and also given in writing that all criminal proceedings against him were withdrawn.

After this incidence CBI approached the bank through the Central Vigilance Commission (CVC) and a meeting with the Chairman and Managing Directors (CMDs) of the six public sector banks was held. In the meeting it was decided that the RBI would be approached for issuing such a circular to all the banks, making it compulsory for them to attain CBI clearance wherever a criminal case was pending.

In the meeting, it was pointed out by CBI that its corruption cases were pending in courts after banks reached out-of-court deals with individuals and corporate houses through one-time settlements.

The meeting was attended by Managing Directors of Punjab National Bank (PNB), State Bank of India (SBI), Bank of India (BoI), Bank of Baroda (BoB), Union Bank and Canara Bank.

The bank officials have been asked to restructure the one-time settlement mechanism, as well reframing their list of members comprising lawyers and property evaluators.