Rogue borrowers’ overdues swell to Rs40,000 crore

According to Credit Information Bureau of India (CIBIL) figures, State Bank of India which has filed suits in 1,104 records to recover Rs 8,961 crore from wilful defaulters tops the list as on June 30, 2014. Punjab National Bank (PNB) has filed for recovery of another Rs 2,000 crore during the 12 months ended June 2014, taking its total suit-filed willful default accounts to Rs 5,122 crore. Central Bank of India has filed a total of 622 suits to recover Rs 2,548 crore.

While Cibil has already compiled the list of 5,096 cases involving Rs 39,656 crore for the quarter ended March 2014, the figure is expected to cross the Rs 41,000 crore mark in the June 2014 quarter following the PNB initiative.

PNB has filed cases against Winsome Diamond for wilful default of Rs 900 crore and Forever Precious Jewellery for Rs 753 crore. It has also filed suit against Zoom Developers for recovery of Rs 410 crore.

Banking sources say the real wilful defaults could be more than double of this at around Rs 80,000 crore as banks are yet to declare many top corporate borrowers as wilful defaulters.

For example, some banks have not declared Kingfisher Airlines which owes Rs 4,000 crore and Winsome-Forever Precious (Rs 5,000 crore) as wilful defaulters. “Getting the money back from a wilful defaulter is a tough proposition. The process can go on for several years. In some cases, there’s no sufficient collateral or assets to recover the money,” said a PSU bank official.

The RBI has defined a wilful default as deliberate non-payment of the dues despite adequate cash flow and good networth, siphoning off of funds to the detriment of the defaulting unit, assets financed either not been purchased or been sold and proceeds have been misutilised, misrepresentation or falsification of records, disposal or removal of securities without bank’s knowledge and fraudulent transactions by the borrower.

However, some of the wilful defaulters have been challenging the banks’ decisions in the courts to delay the process. The RBI has now formed guidelines for non-cooperative defaulters who resist repaying at every corner and hold up the entire repayment process. In such cases, the recourse to legal remedy by a borrower imposes a cost to the system and banks are unable to get back their money using the existing laws such as the Sarfaesi Act.