FM happy’ with bank steps to reduce NPAs

On the NPA problem, he said, “I am very happy with the progress made by banks at the level of the chairman, at the level of the board, at the level of various senior officers. Each account which is an NPA is being individually tackled. That is a major progress which has been made.”

Sinha said he was happy’ with the progress and the follow-up action by the bank chiefs as a sequel to his discussions with them in June this year.

The official RBI figure of non-performing assets (NPAs) as in March 1999 was Rs 58,554 crore, but this amount includes sticky loans below Rs 1 crore as well. The real figure should be much higher since this figure captures only the NPAs of the scheduled commercial banks and does not include the sticky loans of three financial institutions. The NPA figure has already crossed the Rs 60,000 crore mark this year, banking sources said.

During the period between April 1998 and March 1999, the central bank added 1,500 new names to the defaulters’ list, taking the tally to 7,523. This will go up further in the current year.

The Reserve Bank of India’s confidential list of loan defaulters till March 1999 (which lists defaults of over Rs 1 crore) has pegged the size of sticky loans at Rs 39,869.17 crore, up from Rs 28,547.19 crore in March 1998. The defaults concern loans given by 82 institutions, including three financial institutions, 28 public sector banks, 21 foreign banks and 33 private sector banks.

Big bull Harshad Mehta’s sticky account to State Bank of India amounting Rs 812 crore since November 1992 continues to remain as the most heavyweight NPA in the industry. Practically a compendium of corporate India, some of the well-known names which appear in the central bank’s defaulters’ list (1998-1999) are Gian Prakash of the Parasrampuria group for defaulting to the tune of around Rs 487 crore, Vijay Mallya of United Breweries (Rs 4.72 crore to Bank of Tokyo-Mitusubishi), Sanjay Dalmia of Dalmia group (Rs 60 crore), YC Deveshwar, chairman of ITC Bhadrachlam (Rs 20.82 crore), the Ruias of Essar Power (Rs 17 crore), Kanwaljit Singh of Allianz Capital & Management Services (Rs 5.2 crore), and Vinay Bhrat Ram of DCM Ltd (Rs 5.44 crore).

In an effort to fight the scourge of NPAs in the banking sector, the Reserve Bank of India has also compiled a new blacklist of 306 "willfil" loan defaulters. The list pertains to defaults upto September 1999 and has been substantially compiled from the overall defaulters’ list as on March 31, 1999.

Though the total amount estimated by the RBI to be under willful default is a mere Rs 1,169.80 crore (less than one per cent of the total NPAs), the purpose of compiling this new blacklist was to expose those against whom the bank feels there is prima facie evidence of unjustly benefiting themselves at the cost of the banking system.

To be sure, there are not many big or well-known names in the blacklist, for whom the minimum cutoff limit was Rs 25 lakh of outstandings. Of the 52 banks against whom these default numbers have been computed, notable are absentees like Indian Bank and ICICI, which are known to have a fairly sizable list of defaulters. Both ICICI and Indian Bank had NPAs running at levels above Rs 2,000 crore and Rs 3,000 crore respectively in the RBI’s overall list of defaulters (minimum outstandings of Rs 1 crore) as on March 31, 1999.

The central bank has named Chennai-based NEPC Micon as the top-most willful defaulter in the country. The company has not paid Rs 119.86 crore worth of dues to the Delhi-based Industrial Finance Corporation of India (IFCI). IFCI appears to have been the worst victim of the entire "willful defaulter syndrome." The institution has seen negative growth in profits along with a rise in non-performing assets in recent years.

According to the March 1999 default list circulated by the RBI, the SBI had the heaviest burden of NPAs (around 900 accounts for Rs 5,980 crore) in the system, followed by the Industrial Development Bank of India, which had 700 accounts accounting for over Rs 4,000 crore of bad debts.

Some of the prominent corporates which form part of the RBI’s September 1999 list of wilful defaulters are: Nathani Steels (100 per cent subsidiary of Mukand), JCT ltd, DSQ Industries, Pentafour Products, Jenson & Nicholson India, Pennar Aluminium, Sol Pharma, Alpic Finance, Essar Power, Mangalore Chemicals & Fertilisers and Jindal Polytubes.

The RBI’s decision to create a "willful" default list follows mounting public and trade union criticism that banks were being made sick by corporates who deliberately refused to pay their dues. Though defaults can occur for many reasons (business failure, recession, and competition from imports following liberalisation), the question of "willful" default is always difficult to define.