Bankers are up in arms against what they perceive as an unjust punitive action against former SBI Chairman Pratip Chaudhuri who was arrested on Sunday for an alleged loan scam.

While prominent bankers have condemned the arrest as being detrimental to lending and credit flows, the Indian Banks Association (IBA) has asked the Centre to put in place a procedure to safeguard bankers against state-level authorities, including police, in cases of loan defaults.

Former SBI Chief arrested in Jaisalmer hotel loan case

Sunil Mehta, Chief Executive Officer of IBA told BusinessLine that the mechanism to protect bankers should be on the lines of that already in place for central investigative agencies such as the CBI. Mehta said IBA has written to the Secretary, Department of Financial Services (DFS) in the Finance Ministry and the Chief Secretary, Rajasthan Government, seeking their intervention. In its communication to the DFS, the IBA has said the bona fide decisions on loans should not be subject to arrest without a mechanism in place.

‘Examine the evidence’

“How can you arrest a person until you have sufficient evidence against him? It is humiliating to subject a person of Chaudhuri’s stature to go through this. People with sufficient knowledge should examine the documented evidence and find out if there is something mala fide ,” Mehta said.

Bankers, including former SBI chiefs Rajnish Kumar and Arundhati Bhattacharya, have also voiced support for Chaudhary and highlighted the bankers’ precarious situation. Uday Kotak, Managing Director and CEO, Kotak Mahindra Bank and Chairman of the IL&FS board, said on Tuesday, “Based on what I have read, we need to have a criminal justice system which protects bona fide actions taken by lenders to recover their money.”

Meanwhile, industry observers pointed out that Chaudhuri retired as SBI Chairman on September 30, 2013. SBI had assigned the asset in March 2014 to Alchemist ARC. Pratip Chaudhuri joined the ARC Board only in October 2014. Some bankers pointed out that the allegation against Chaudhuri is not borne out as he was neither with the SBI nor with Alchemist when the asset was assigned to the ARC.

Alchemist ARC in a statement alleged that defaulters in the Hotel Gaudavan matter are taking the “judicial machinery for a ride”.

With inputs from Surabhi

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