At a time when promoters are being barred from bidding for those of their assets undergoing insolvency, 5,490 wilful defaulters, each with a loan of Rs 25 lakh or above and against whom banks and other lenders have filed suits, have in all defaulted on loans worth Rs 60,739 crore.
This is a decline of nearly 40 percent from a quarter ago, which saw 9,077 wilful defaulters with unpaid loans worth Rs 1.07 lakh crore, according to data compiled by TransUnion Cibil, a credit bureau company.
Surprisingly, this does not include the dirty dozen or the 12 large corporate accounts, constituting 25 percent of the banking sector’s total stressed loans, currently being resolved under the insolvency and bankruptcy code (IBC). None of these companies, who were referred for resolution under IBC by the Reserve Bank of India, or their promoter groups have been labelled wilful defaulters.
These would include the likes of Kingfisher Airlines, Zoom Developers, Winsome Diamonds and Varun Industries facing media glare for their rogue credit culture that burdened the banking sector with a tough task of recovering those loans.
These companies are labelled ‘wilful defaulters’ because they defaulted on bank loans, despite either the company or its promoters having the ability to repay the loan, or they siphoned off money, or put it some other use than was agreed on, as defined by the RBI.
The total outstanding loans by such defaulters rose 20.4 percent (over a year ago) to Rs 92,376 crore at the end of financial year 2016-17, said a response to a question in Parliament.
As on March 2017, there were 8,642 wilful default cases, 36 percent higher than the number in September. According to reports, banks have filed First Information Reports (FIRs) in 1,900 of these cases, with outstanding loans of Rs 32,484 crore.
However, the September data does not include cases of the country’s two largest public sector lenders - State Bank of India and Punjab National Bank.
In June, SBI constituted had on its books 1,659 defaulters with delinquencies of Rs 26,658 crore while PNB had 963 defaulters owing it Rs 11,880 crore.
On Thursday, in a set of amendments to the IBC, the government passed an ordinance barring promoters of large stressed accounts or bad loan cases from bidding for their own assets if they have defaulted on loans for one year or more.
Also Read: Promoters with NPAs of a year or more barred from bidding in insolvency process
Kalpesh Mehta, Partner at Deloitte, said, “The 12 cases may not have wilful defaulters but there are many other borrower parties. This (the amendment) was mainly to protect the bankers as borrowers could use this as a tool to ask banks to take hair-cut and get benefit and buy it back. Basically it is not to renegotiate your existing borrowings and only use it for the purpose of a genuine revival or resolution for an insolvency process and not for a wilful defaulter.”
Experts say this could serve as a booster for the over 400 corporate cases currently undergoing insolvency proceedings.
In June, the RBI had identified 12 large accounts, which made up 25 percent of the banking system’s gross non-performing assets, and asked banks to refer these for resolution under the IBC. It then came out with a second list with another 30 or so accounts. The RBI has given banks until December to try and come up with a resolution plan, failing which these firms would be taken to bankruptcy court too.
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