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Private banks turn more cautious in granting new loans after controversies

The ICICI Bank NSE -0.55 % controversy and Axis Bank’s chief cutting short her tenure have now made private sector lenders extra watchful about making loans, picking up a trend that’s been prevalent at state-owned banks in the wake of corruption investigations. Decisions that were considered routine a few months ago are getting delayed, said bankers and others with knowledge of the matter.

“Bankers are unwilling to sign a single paper especially after these issues about ICICI Bank and the Axis Bank NSE -0.19 % CEO have come to light,” said Purvesh Shelatkar, senior vice president, institutional sales at Centrum Broking. “In one case that I personally know of, an IT solutions provider had been sanctioned a loan but the money has not been released because there are questions over its credit rating. These things will happen more often now.”

It’s too early to say whether this additional vigilance at private banks will slow credit growth, which is a critical component of India’s push for economic revival.

The executives at private banks that ET spoke to for this story confirmed processes had tightened up considerably in the past few weeks, declining to be identified.

ICICI Bank has had to defend itself against allegations of impropriety over loans to VideoconNSE -4.57 % group, which has defaulted on its debt. Videocon promoter Venugopal Dhoot is said to have loaned money to a company started by Deepak Kochhar, husband of ICICI Bank chief Chanda Kochhar.

Deepak Kochhar has denied there was any quid pro quo involved and the bank has said it has faith in its boss. Axis Bank CEO Shikha Sharma cut short her term after the central bank queried a three-year extension, reportedly over the bank’s performance.

Some said this will make private banks pay greater attention to loan viability. “Banks will be careful to run the processes and ensure checks and balances,” said Rajesh Mokashi, CEO at Care Ratings. “We will go through a transition where processes will be reexamined. Banks have to go through a phase of introspection which will lead to healthy banks going forward.”

However, questions being raised even five years after loans were sanctioned have increased concerns that bankers could face investigation even after retirement for alleged impropriety.

“No one will want to come into the banking profession now,” said a former banker. “Nobody is safe, nobody can do their work in peace. That is the situation currently.” The latest case became public on the weekend and involved stateowned UCO Bank.

The Central Bureau of Investigation is said to have registered a case against its former chairman and managing director Arun Kaul and four others over allegations they defrauded the bank by Rs 621 crore through “diversion and siphoning off the bank loans, without utilising it for the sanctioned purpose and produced false end-use of certificates issued by the chartered accountant, by fabricating business data,” according to PTI. Some executives said the investigative agencies don’t have a clear idea of how lending works.

“Credit decisions are not tick-box decisions. They are taken based on judgement calls taken based on rational assumptions validated for relevance at the time of the decision,” said State Bank of India deputy managing director Sunil Srivastava, who retired after more than 30 years at the country’s largest lender.

“Take for instance the power sector — in 2007, the Central Electricity Authority projected a steep rise in demand for power, which it reiterated in 2012. But then in 2017, we have a situation of more power being generated than demand. Should banks which have financed these projects then be hauled up for lending to this sector?”

Srivastava said the allegations seem to reflect a lack of understanding. “It is the basic business of the banks to lend and lending would have to be differentiated from auctions or allocation of quotas or for that matter tenders and we shouldn’t create an atmosphere of extreme distrust,” he said. “If we don’t develop the maturity to differentiate between malfeasance and misfeasance, we may unwittingly land up encouraging only nonfeasance.”


Why the Supreme Court has only itself to blame for the recent unsavoury episodes

The Supreme Court of India is in crisis. The Narendra Modi government is playing hardball with the court’s Collegium. The Congress-led opposition, too, has a target: Chief Justice of India Dipak Misra. Each assails the other with sly ambitions to weaken the judicial branch. But behind this chronic politics of motive is a deeper issue of fit: Who, if anyone, should judge the judges?

The Constitution bars parliamentary discussions on judges and their conduct of duties; impeachment proceedings are the only exception. But the latter process is tiring. So judges, in effect, occupy a zone of self-government. They must police their conduct, earnestly attend to allegations of wrongdoings and convey impartiality.

Has the judiciary done these? Hardly. The Supreme Court instead has fashioned a troubling brand of self-government.

A series of decisions has methodically inoculated courts from the claws of accountability even as judges exacted imperious standards from other branches of government. A caste of rules governs India: one for judges, another for all else.

Sample this. The higher judiciary has become a self-appointing body. The Constitution grants the executive an equal say in matters of judicial appointments. The court, however, has elbowed itself into eminence. It has since begrudged even small ounces of transparency. Setting up secretariats to administer appointments and publicising (parts of) collegium discussions are reasonable proposals. But the court opposed them for a long time.

Judges have cushioned themselves from criminal investigations, too. In 1991, the Supreme Court invented a new rule: first information reports against sitting judges require consultations with the chief justice of India. (In practice, it means his concurrence.) Separate approvals are needed to prosecute them. Note: the Constitution only bars criminal proceedings against sitting presidents and governors. The court merrily added judges to the list.

In 2005, Parliament enacted a revolutionary law: the Right to Information Act. But an adamant court refuses to obey the legislation. Still, in 2009, the Delhi High Court brought the chief justice of India, his administrative roles, within the law’s ambit. The Supreme Court promptly accepted an appeal. Close to a decade has lapsed. Yet, a bench summoned to hear the matter hasn’t commenced proceedings

Artful delays aren’t the sole preserve of the executive branch; the judiciary, too, specialises in it. Remember demonetisation? Challenges to its validity still await a full day in court.

And last month, the court rebuffed pleas to constrain the chief justice’s discretion in forming benches. He is an "institution in himself"; to distrust him is to diminish the office, the court reasoned. This is odd. Absolute discretion, the court has long insisted, doesn’t exist in India’s constitutional order. Apparently, it does. But only for judges.

Implicit in these decisions is a decadent idea of self-government: to govern without the law, above the law, in disregard of the law. The court’s sermons on accountability, it is clear, are a backsword; they slay on one side only.

This selective, almost arbitrary application of principles couldn’t have lasted forever. A blowback was inevitable. It has arrived. The Modi government’s slow-act on the collegium’s recommendations, the Congress’s flirting with a motion to unseat the chief justice, the repeated petitions to quell bench-related discretion are revolts against a colonial logic of self-government.


CBDT directs income tax department to hold grievance redressal fortnight for taxpayers in June

NEW DELHI: The CBDT has directed the Income Tax department to hold a special 'grievance redressal fortnight' next month to address taxpayers' disputes regarding rectification and adjustments made in tax demands.

The policy-making body for the tax department has asked the regional chiefs of the department to organise this country-wide session at their designated offices between June 1-15.

The Central Board of Direct Taxes (CBDT), in an official communication, said that the redressal of public grievance and taxpayer service is an area of "top priority" for the board and the government.

"The delay in giving effect to an appeal and passing rectification orders is the biggest source of grievance against the department.

"Moreover, such delays also adversely affect the performance of the department as the infructuous demand remains stuck in appeal orders and rectification petitions till these are disposed of by the assessing officer," CBDT Member (Revenue and Tax Payer Services) Ajit K Shrivastava said in his communication to the top brass of the department in the country.

In order to "expeditiously dispose of" the appeal and rectification claims of the taxpayers, it has been decided to dedicate the first fortnight of June for attending to the pending claims in these areas, it said.

During this period, the CBDT member said all assessing officers shall accord "top priority" to the work of giving appeal effect and passing the rectification orders and shall earmark the first half of the day to meet applicants/counsel who seek to have a hearing to explain their case.

The CBDT has also asked the taxman to give "special attention" to those demands which are disputed by the taxpayer in response to proceedings under section 245 Of the Income Tax Act (that empowers the assessing officer to adjust refund or a part of refund against any tax demand) as delay in such cases was creating widespread dissatisfaction amongst taxpayers.

"Moreover, wherever 'challan' correction is required to be carried out to give credit for pre-paid taxes, the same should also be taken up on priority.

"For this purpose, the supervisory officers must ensure that the deductors are made to file correction statements whenever there is a mismatch because of failure of deductor to file quarterly statement properly and correctly," it said.

The board has also asked the department to ensure wide publicity for the event, especially among the local chapters of the Institute of Chartered Accountants of India (ICAI) and bar associations so that they can get the matters of their clients disposed of within this special fortnight.


CONVOCATION PROGRAM

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Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry’s standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries, but also the leap into…


EDUCATIONAL TOUR

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WELCOME PROGRAM

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