New Delhi: Amid a raging row over loan defaults by Vijay Mallya, the government Sunday said "full force of the law" is being applied to bring all wilful loan defaulters to justice.
Minister of State for Finance Jayant Sinha said wilful defaulters and the corporates that are unable to repay loans as their business being hit due to global slowdown should not be commingled.
"We have some people that are wilful defaulters, that have genuinely engaged in illegal activity. As far as those are concerned, the full force of the law is being applied. All the investigative agencies are working in that regard to ensure that they have to be brought to justice," he told reporters here.
He, however, did not made any direct reference to Mallya who had left India on March 2, presumably for London, days before the Supreme Court heard a plea of clutch of state-owned banks seeking recovery of over Rs 9,000 crore from his group companies.
Sinha said the second set of defaulters are those corporates who because of some slowdown in global economy or because of policy failure of the previous government are facing significant financial distress.
"And we have to have appropriate resolution process as well as appropriate policy intervention to ensure those that are NPAs for those kind of reasons go through orderly resolution process," he said.
He said there wasn't anything "illegal or criminal" done by those classic business failures that happened because of wrong business/financial strategies or external factors that made project or business unviable.
"... We have to recognise that we have to ensure these problems have occurred because people have done willfully wrong thing ...(and) people who are facing business challenges do not have to go through those kind of problems again.
"So we have to deal with structural issues which is where bankruptcy code becomes important so that we avoid these problems in future...," he said.
Sinha was addressing media along with IMF chief Christine Lagarde at the end of three-day Advancing Asia conference co-hosted by India and IMF.
Lagarde supported Reserve Bank Governor Raghuram Rajan's move to address bank balance sheets "head-on".
"I think the approach is right. He is accessing the weakness of the bank balance sheet... (and) those accounts that have extensively borrowed from the banks," she said.
The Finance Ministry, she said, was also addressing the issue from legal point of view in pushing through Parliament a bankruptcy law that will help reorganise those corporate accounts that are loaded with debt, which weigh on bank balance sheets.
"I think equally relevant are various mechanisms and instruments that are being worked out to deal with bad loans and distressed assets in banks's balance sheets and are clearly clogging their balance sheets," she said.
Lagarde said reorganising them in such a way that they become more agile and are able to lend better in a more sustainable basis is going to be good for growth.
"Banking system of India seems to be well capitalised and this effort to reinforce and strengthen even better is well taken," she said.
Sinha said the resolution process needs to be strengthen both in near terms through Corporate Debt Restructuring (CDR) and Strategic Debt Restructuring (SDR) but in the longer term through bankruptcy and insolvency code, which is in Parliament.
Stating that it was important to prevent these kind of situation from occurring again. He said a comprehensive, multi dimensional approach to strengthening banking system is being adopted.
"In pursuit of that RBI and Finance Ministry have got together very closely to address the structural issue," he added.