The Supreme Court has expressed serious concern over what it described as a deep-rooted nexus between banks, asset reconstruction companies and borrowers, questioning the manner in which large loan defaults are being settled.
A bench comprising Chief Justice Surya Kant and Justice V. Mohan observed yesterday that public money collected from taxpayers is being lent through banks, but effective efforts are often not made to recover these dues. The Court said that it was concerned about the mis-utilisation of public money, which should have been spent for the welfare of people.
The apex court issued notices to the Centre, the Reserve Bank of India, and other concerned parties on a petition alleging that loans worth Rs 1,537 crore owed to public sector banks were settled through two asset reconstruction companies for just Rs 73.5 crore.
During the hearing, the bench raised concerns over the process adopted for settling stressed assets and observed that there is a pressing need to examine the functioning of asset reconstruction companies.
The Court was hearing a plea seeking an investigation into an alleged banking fraud involving the role of asset reconstruction companies in the settlement of bad loans.
