• Court wants government's `action taken' report in six weeks
  • Seeks details of loans above $73 million written off by banks

As India’s policy makers struggle to tackle surging bad loans and delinquent borrowers, the nation’s judiciary on Tuesday joined the government and the central bank in their efforts to find a solution to stressed assets that have risen to a 14-year high.

A two-judge bench of the nation’s Supreme Court directed the Reserve Bank of India to share a list of the country’s largest defaulters in the last five years and also sought details of loans above 5 billion rupees ($73 million) written off by state-owned lenders, all in a sealed envelope. Additionally, the RBI, which is also the banking regulator, was asked to furnish information on loans restructured in the last five years.

In December, RBI Governor Raghuram Rajan set lenders a March 2017 deadline to clean up their balance sheets by increasing provisions after revamped and soured debt as a proportion of total advances jumped to 11.3 percent at the end of September. Eleven state-run banks reported losses last quarter, while Junior Finance Minister Jayant Sinha estimates the stock of stressed assets at about 8 trillion rupees ($117 billion).

Public Money

The bench, headed by Chief Justice T.S. Thakur, directed Prime Minister Narendra Modi’s government to file an “action taken” report within six weeks, adding “these are public money” and shouldn’t be misused. RBI’s Mumbai-based spokeswoman Alpana Killawala couldn’t immediately comment, while Finance Ministry spokesman D.S. Malik wasn’t reachable on his phone.

The court’s directives were based on an Indian Express newspaper report last week, which cited data obtained from RBI to show that more than 1.14 trillion rupees of loans had been written-off by the country’s state-run banks in three years through March 31.

Rising bad debts and inadequate risk buffers at India’s state-run banks have been hindering Modi’s attempts to revive lending growth in the $2 trillion economy.

State-owned banks account for more than 70 percent of India’s outstanding loans. Government-controlled lenders will require infusions of 1.8 trillion rupees in equity to comply with international standards under the so-called Basel III regulatory regime, Finance Minister Arun Jaitley said in August.

Addressing bankers at a conference last week in Mumbai, Rajan said some financial analysts have made “wild claims” about the size of the bad loans in India that verged on “scare-mongering.” The clean-up of lenders’ books underway will help restore their health and soon position them to revive economic growth, he said.

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