Bangalore-based liquor baron Vijay Mallya has apparently become a model of wilful defaulters in India. Mallya’s case prompted bankers to dig up more cases of wilful defaulters in India and based on the reports published by the Credit Information Bureau India Limited (CIBIL) there are 5,275 wilful defaulters that owe Indian banks whopping 56,521 crores ($8.56 billion) let’s take a look at the details of these defaulters and their modus operandi.
CIBIL has published the reports of 5,275 wilful defaulters that owe Indian banks around 56,521 crore which is manifolds compared to Mallya’s 7000 crores default. According to the reports, the money that wilful defaulters owe Indian banks has grown up to nine-fold over 13 years time. The banks declare borrowers as ‘wilful borrowers’ when they default in payments of dues deliberately, despite their ability to do so. All the defaults are not wilful since in many cases it is the adverse economic conditions. Mallya’s defunct Kingfishers Airlines stands fourth on the CIBIL list of wilful defaulters, that is made available to Indiaspend.
According to the report, India’s five major wilful defaulters include the Mumbai-based Winsome Diamonds & Jewellery Ltd. and its associate, Forever Precious Jewellery & Diamonds Limited that together owe the banks Rs. 3,263 crore. The next in the line is Indore-based real estate developer Zoom Developers owe Rs. 1,647 crore, Kingfisher Airlines stands third with Rs. 1,200 crore while Mumbai-based Beta Naphthol owes Rs. 951 crore and Kanpur-based Raza Textiles owe Rs. 694 crore to the Indian Banks.
Except Winsome Diamonds & Jewellery Ltd, the other companies are in various stages of liquidation, according to the Ministry of Corporate Affairs website. E-mails sent last week to Winsome Diamonds and Kingfisher Airlines went unanswered, as did emails to two prominent banks that loaned them money—State Bank of India (SBI) and Punjab National Bank (PNB). SBI accounts for 32% of dues owed by wilful defaulters. Since 2002, the total amount owed by wilful defaulters grew 9 folds from Rs 6,291 crore ($0.95 billion to Rs 56,521 crore ($8.56 billion) claims the report.
According to the General Secretary of All India Bank Officers Associations, the nexus between the chairman of public sector banks and defaulters had resulted into such big wilful defaults. “A powerful nexus between chairmen of public sector banks, auditors, Reserve Bank of India and the banks’ boards is behind the country’s total Non-Performing Assets (NPA) and wilful defaulters,” said S Nagarajan of All India Bank Officers Associations.
Shockingly the state of Maharashtra has more defaulters compared to any other states in India. There are total 1,138 wilful defaulters in Maharashtra alone that owe Indian banks Rs. 21,647 crore. Next to that is West Bengal with 710 defaulters and Andhra Pradesh with 567 defaulters. But in terms of defaults, Delhi is second with more than Rs 7,299 crore.
According to the reports, nationalized banks account for 79% of money loaned to the defaulters. There are total 19 nationalized banks that record 4,738 wilful defaulters that owe them more than 26,600 crores. Out of that SBI and its associates record 1,546 wilful defaulters that owe 47,350 crores. This displays as how the defaulters in public sector banks overshadow the foreign private bankers in India.
According to the sources, the nationalize banks don’t show many defaulted loans to CIBIL since they have hand in gloves with defaulters and politicians. “Often, banks do not even report unpaid loans to CIBIL due to a nexus between politician and defaulter. Kingfisher is on the top of the list because Mallya’s cover has been blown. This is the reason corporate get easy loans from government banks and not private and foreign banks,” Said a manager of the Singapore-based bank. Private-sector banks also have an unpaid loan problem, but their bad loans are less than half the level of public-sector banks, which account for 73% of all lending, as IndiaSpend reported last month.
According to the statement made by one lawyer of the nationalized bank, “Government banks face immense pressure from parliamentarians to provide loans to corporate, the politician-bureaucrat-corporate nexus is very strong,” said Sanat Dutta, a lawyer for nationalised banks in debt recovery tribunals for more than 10 years. India’s wilful defaulters have a history of using loans from public banks for a variety of purposes–some unrelated to their businesses, others used for expansion without business diligence.
Another shocking fact here is, among the list of wilful defaulters, there is an English daily Deccan Chronicle which is still surviving despite a string of unpaid loans that has been used by them for other businesses such as cricket team. There are hundreds of such cases whereby the defaulters have used the money provided by the banks to them for the purpose other than allowed by banks. The list is never ending and banks may never be able to recover the loans from all the defaulters. Till the time, politicians will interfere with the nationalized banks forcing them to lend the corporate houses the Indian banks will have only bad debts to face.