Total dues of top 100 willful defaulters to the banks rose by 5.34% in fiscal year 2020 (FY20) to Rs 84,632 crore from Rs 80,344 crore in FY19, according to data shared by RBI in response to an application under the RTI act.
The Reserve Bank of India (RBI) shared information about defaulters after an application was filed under the Right to Information (RTI) Act by Biswanath Goswami.
According to the Reserve Bank of India (RBI) , a borrower is defined as a ‘wilful defaulter’ if the company has not met repayment obligations despite having the capacity to do so. While a ‘wilful default’ tag does not necessarily imply wrong-doing on the part of the promoters, the classification is also used while referring to loan fraud cases, where the borrower has diverted the loan for purposes other than those initially stated.
The Willful defaulter data list, released by the RBI comes from a large centralised banking system database called ‘CRILC’ ( Central Repository of Information on Large Credits) . This is a pool of data on the credit information of all borrowers who have an exposure of Rs 5 crore and above. CRILC has in the last three years been particularly useful as a data-sharing mechanism between banks as well, to identify errant borrowers and ensure they don’t try to cheat the system. From February 2019, banks have had the option in CRILC to categorise whether a borrower is a wilful defaulter or not.
The willful defaulters list for FY20 consisted of many well known names like Gitanjali Gems, Winsome Diamonds & Jewellery , Forever Precious Jewellery and Kingfisher Airlines. Gitanjali Gems, owned by Mehul Choksi, topped the list with Rs 5,693 crore dues, followed by Jhunjhunwala brothers’ REI Agro with Rs 4,403 crore dues and Jatin Mehta’s Winsome Diamonds & Jewellery with Rs 3,375 crore dues.
Meanwhile both private as well as government banks have had a considerable exposure to these defaulters. Punjab National Bank had the highest exposure to Gitanjali Gems with Rs 4,644 crore of non-performing assets (NPA) as on March 2020. PNB also had Rs 1,447 crore exposure to Gili India and Rs 1,109 crore to Nakshatra Brands.
The State Bank of India had Rs 1,875 crore dues from top 10 willful defaulters. UCO Bank had Rs 1,970 crore exposure to REI Agro with half of it being written off. Banks’ total gross NPA reduced to 8.2% at the end of March 2020 from 9.1% a year earlier. A fact that worth noting is that nearly three-fourths of the total sum has been written off by banks to clean balance sheets and avail tax benefits.
Despite the write-offs, the defaulters have appeared in the internal CRILC database of RBI and will keep appearing till they clear the dues. Write-offs are accounting entries that transfer NPAs from active balance sheets to off-balance sheets. Any recovery from these defaulters would add to the net profit of lenders.