New Delhi: The recent Punjab National Bank (PNB) fraud case, predicted to cost banks over Rs 20,000 crore, has revived tensions in the Indian banking sector. At a time when the government is determined on recapitalising public sector banks, it has again been held back by a string of loan frauds and rising willful defaulters. Data suggests that there are roughly 9,339 willful defaulters, who have the capacity to repay their debts but have refused to do so in the past. In total, the liabilities of these defaulters stand at Rs 1,11,738 crore, reports The Indian Express.
In the report, it has been mentioned that at least 7,564 borrowers have defaulted paying back Rs 93,357 crore to state-owned banks as of September 2017. All data on this front is available on the Credit Information Bureau of India Ltd (CIBIL), and it indicates that in less than five years, the debt of willful defaulters has risen 340 percent from Rs 25,410 crore in 2013 to Rs 1,11,738 crore in 2018.
While the Reserve Bank of India, which claimed to have cautioned banks about a PNB-like fraud in August 2016, is yet to release the full list of defaulters. The RBI has also set up a panel to investigate the issues related to rising bank frauds. However, the apex bank had earlier in 2017 informed the Supreme Court that it is not in favour of disclosing lost of loan defaulters who owe more than Rs 500 crore PSBs.
The norms for categorising an individual or unit as willful defaulter have already been defined by the RBI, where it clearly states that an individual/company is declared as a willful defaulter if repayment of loans has not been initiated, despite having sufficient means to do so. Apart from that, it also includes names of those who have siphoned off funds or not utilised the loan for the purpose it was borrowed.
It may be noted that PNB, despite bagging three vigilance awards from the CVC, has been struck multiple times by cases of loan fraud. Apart from the Rs 11,400 crore fraud, PNB has willful defaults to the tune of Rs 12,574 crore, involving more than 1,000 borrowers as of December 2017, reveals latest data available on CIBIL. Winsome Diamond, Nafed, and Apple Industries have been listed as major defaulters by PNB.
However, it is the largest lender State Bank of India that has the highest amount of willful defaults amounting to Rs 27,716 crore, involving 1,665 borrowers. With a debt of Rs 1,286 crore, Kingfisher Airlines tops SBI’s list of willful defaulters, followed by Calyx Chemicals, JB Diamond, Spanco, Zenith Birla, Shreem Corp, and several others.
There are several other banks which have a high number of defaulters, taking the total amount of debt to the figure of Rs 1,11,738 crore. It may be noted that RBI has given green signal to credit rating agencies like CIBIL to disclose the identity of willful defaults and those involved in scams.
Another interesting information that has come to light is that banks have written off Rs 3,60,000 crore in the last 10 years. Rating firm Crisil said the total gross NPAs in the banking system might rise to Rs 9.5 lakh crore by the end of this fiscal. The acute rise of NPAs that banks are trying to limit, skyrocketed in 2015, increasing significantly from Rs 3.2 crore recorded at the time. This development took place after the RBI asked banks to recognise NPAs.
The government is under pressure to reduce the liabilities of public sector banks, as a large number of NPAs have dampened the country’s growth prospects. The recent recapitalisation plan, under which massive funds were allocated to banks, has also taken a big hit due to the fraud conducted by diamond jewellery designer Nirav Modi, his business partner Mehul Choksi and other family members.