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India's Top Loan Defaulters
Write-offs close to Rs 1.5 lakh Cr over the last 7 yrs; Kingfisher, Winsome Diamond and Electrotherm top the list –
For long it has remained the most closely guarded secret in Indian banking, the list of who are the top defaulters to the Indian banking system. Bankers citing the banking secrecy laws were loathe to revealing names, even as the write-offs shaved close to Rs 1.5 lakh crores off the profits of the banking sector over the last seven years.
On Wednesday (4 December), the All India Bank Employees Association publicised the names of almost 3500 willful defaulters above Rs 1 crore, which it claims it obtained from a list prepared and circulated among banks. RBI does collect, collate and share list of defaulters periodically with banks for better vigilance, according to an RBI official. BW did not independently verify the data.
Topping the AIBEA list is Kingfisher Airlines at Rs 2,673 crore. Vishwas Uthagi, vice president of the association admits that it is publicly known that the company has a much larger outstanding, pointing out that the numbers here could even be an understatement.
Winsome Diamond & Jewellry, which was in the news earlier in the year for defaulting after they managed to release securities given to banks comes next in the list with Rs 2,660 crore in loans not repaid. Electrotherm India, Zoom Developers, Sterling Biotech, and S Kumars Nationwide follow with amounts exceeding Rs 1,500 crore against each of them, according to the AIBEA.
The Reserve Bank as well as the Finance Ministry have long been concerned about the way in which several promoters took advantage of banks by defaulting on loans or taking advantage of the crporate debt restructuring mechanism, which helped dress up bad loans as good, giving borrowers more time to repay. Some estimates put the amount of loans restructured at over Rs 3,25,000 crores (out of a total of Rs 5 lakh crores in bad loans over seven years). Finance Minister P Chidambaram had earlier this year remarked about how we have ‘affluent promoters and sick companies’.
AIBEA cites Lok Sabha records to state that SBI alone had 2,419 accounts with a Gross NPA exceeding Rs 1 crore as of March 2012, more than double than the number two years before. Across 27 public sector banks that number stood at 7,295 accounts owing Rs 68,262 crores. Anand Desai, managing partner of law firm DSK Legal, says that quite often, being declared insolvent is not a sufficient disincentive for promoters to be more responsible with funds. Some years ago, it was rumoured that a few people even considered it as a sign of 'having arrived' as they had outsmarted creditors by diverting funds, he says.
The AIBEA is planning to make representations demanding that banks publish list of defaulters of over Rs 1 crore, and to make willful defaults a criminal offence, amend recovery laws, and take stringent measures to recover such loans, says Uthagi. But criminalizing default will require action to be initiated by banks. Anand Desai says that banks will have to prove that the promoter misappropriated funds with the intention of cheating the bank. Perhaps it is time for banks to step up their game.
India's Top Loan Defaulters
Write-offs close to Rs 1.5 lakh Cr over the last 7 yrs; Kingfisher, Winsome Diamond and Electrotherm top the list –
For long it has remained the most closely guarded secret in Indian banking, the list of who are the top defaulters to the Indian banking system. Bankers citing the banking secrecy laws were loathe to revealing names, even as the write-offs shaved close to Rs 1.5 lakh crores off the profits of the banking sector over the last seven years.
On Wednesday (4 December), the All India Bank Employees Association publicised the names of almost 3500 willful defaulters above Rs 1 crore, which it claims it obtained from a list prepared and circulated among banks. RBI does collect, collate and share list of defaulters periodically with banks for better vigilance, according to an RBI official. BW did not independently verify the data.
Topping the AIBEA list is Kingfisher Airlines at Rs 2,673 crore. Vishwas Uthagi, vice president of the association admits that it is publicly known that the company has a much larger outstanding, pointing out that the numbers here could even be an understatement.
Winsome Diamond & Jewellry, which was in the news earlier in the year for defaulting after they managed to release securities given to banks comes next in the list with Rs 2,660 crore in loans not repaid. Electrotherm India, Zoom Developers, Sterling Biotech, and S Kumars Nationwide follow with amounts exceeding Rs 1,500 crore against each of them, according to the AIBEA.
The Reserve Bank as well as the Finance Ministry have long been concerned about the way in which several promoters took advantage of banks by defaulting on loans or taking advantage of the crporate debt restructuring mechanism, which helped dress up bad loans as good, giving borrowers more time to repay. Some estimates put the amount of loans restructured at over Rs 3,25,000 crores (out of a total of Rs 5 lakh crores in bad loans over seven years). Finance Minister P Chidambaram had earlier this year remarked about how we have ‘affluent promoters and sick companies’.
AIBEA cites Lok Sabha records to state that SBI alone had 2,419 accounts with a Gross NPA exceeding Rs 1 crore as of March 2012, more than double than the number two years before. Across 27 public sector banks that number stood at 7,295 accounts owing Rs 68,262 crores. Anand Desai, managing partner of law firm DSK Legal, says that quite often, being declared insolvent is not a sufficient disincentive for promoters to be more responsible with funds. Some years ago, it was rumoured that a few people even considered it as a sign of 'having arrived' as they had outsmarted creditors by diverting funds, he says.
The AIBEA is planning to make representations demanding that banks publish list of defaulters of over Rs 1 crore, and to make willful defaults a criminal offence, amend recovery laws, and take stringent measures to recover such loans, says Uthagi. But criminalizing default will require action to be initiated by banks. Anand Desai says that banks will have to prove that the promoter misappropriated funds with the intention of cheating the bank. Perhaps it is time for banks to step up their game.
India's Top Loan Defaulters
