The country's banking system needs an overhaul to plug loopholes that allow loan defaulters to go scot-free, the Supreme Court told the Centre on Tuesday. A bench led by Chief Justice TS Thakur asked the Narendra Modi government to reform the banking system to stop bad loans that are draining the country's banking sector, reported The Indian Express.

Referring to an earlier report by the English daily that stated that Rs 1.14 lakh crore was written-off by public sector banks in the past three years, the court said the existing system is clearly not working. The report was published in February quoting an RTI reply by the Reserve Bank of India. On April 26, another report by the newspaper quoted the RBI suggesting that the Punjab National Bank wrote off over Rs 8,500 crore as non-performing assets in the past two years, though the bank denied it.

"Don’t say your system is perfect because had that been the case, you would not have such huge outstanding and write-offs … something is certainly missing in the system … something is not working and so you must reform it,” the apex court bench said.

The court has asked Solicitor General Ranjit Kumar to keep the bench posted regarding the measures being taken to resolve the issue. The government informed the bench that the Centre has already planned a few amendments to deal with the swelling problem. “Bankruptcy Code will soon be in place too. We are working on it,” Kumar told the court.