The Centre is working with the RBI, banks and various other government agencies to ensure that the issue of irregularity in food credit accounts of the Punjab government are satisfactorily resolved.
Speaking on the sidelines of the Indian Merchants’ Chamber’s ‘Banking & Finance’ conference, Jayant Sinha, Minister of State (MoS) for Finance, said: “We are investigating the matter…We are looking at a systemic solution. It needs to be done in a structured and systematic way.”
According to various reports, the State has been unable to account for the money disbursed by a consortium of banks led by State Bank of India towards foodgrains procurement for two years — 2012-13 and 2013-14.
The banks are believed to have extended food credit (cash credit limit) to the tune of ₹12,000 crore. Given the experience, banks have cold shouldered the State’s attempt to get further credit for the new procurement season.
With the Punjab Government not yet regularising the cash-credit limit, the banks that have lent the money have become jittery as once the loan account is declared non-performing, they will have to make provisioning (funds set aside by a bank to pay for losses that are anticipated to occur in the future).
Usually, bank loans to State governments are seen as sovereign and considered safe bets.
On the Reserve Bank of India flagging the issue of making provisions for this account, Sinha said: “The issue raised by the Reserve Bank is correct from the standpoint of the regulator. Banks’ explanation is also correct. We need to find a right solution for the issue.” Banks, which are reeling under the weight of bad loans, have pressed the panic button in the backdrop of the RBI asking them to clean up their balance sheets before March-end 2017.
Sinha said the government will investigate the matter and come out with the actual position in a few days.
Reports say ₹20,000-crore worth foodgrains procured by the Punjab government are missing from the State’s godowns. However, Punjab government has denied the reports, stating that all stocks procured over the years have been duly accounted for.