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Journalism of Courage
MUMBAI, MAY 30: In an effort to fight the scourge of non-performing assets (NPAs) in the banking sector, the Reserve Bank of India (RBI) has compiled a new blacklist of 306 "wilful" 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 wilful default is a mere Rs 1,169.80 crore (just one per cent of the total NPAs of over Rs 1,00,000 crore in the system), the purpose of compiling this new blacklist is 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 September 1999 list indicates that in a majority of cases banks have categorised defaults as "wilful" despite the fact that they are to initiate legal action against the erring parties. Of the 306 cases of wilful defaults, there are only 54 suit-filed accounts.
The central bank has named Chennai-based NEPC Micon as the top-most wilful 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 "wilful defaulter syndrome." The institution has seen negative growth in profits along with a rise in non-performing assets in recent years. Its shares currently quote below the par value of Rs 10. IFCI has 24 wilful defaulters responsible for NPAs worth of Rs 326.36 crore. Out of the top 20 names in the overall list, eight have defaulted against this institution.
The State Bank of India ranks second in terms of amounts involved, with 65 names defaulting to the tune of Rs 188.56 crore. 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 making over Rs 4,000 crore as bad debts.
Some of the prominent corporates which form part of the RBI’s September 1999 list of wilful defaulters are: Nathani Steels (a 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 "wilful" 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 "wilful" default is always difficult to define.
Though the central bank had taken the initiative to prepare such a list way back in the beginning of 1999, not much headway could be made as banks had a tough time choosing the names to put under this category.
Observers in the industry are critical about this exercise as they are not sure how fair banks have been in choosing some names as "wilful defaulters". The list has only 306 names in a field of 8,000-10,000 actual defaulters. They wonder whether the big fish have been quietly left out.
Some banks might also have suppressed the names of their favoured clients and picked up unknown, helpless customers,they feel.
