WILLFUL DEFAULTERS ON THE RISE

By Ruma Dubey

There are defaulters and now there seems to be an increasing clan of willful defaulters.

People who have the money but yet do not bother to repay the banks – that kind of debtors is on the rise. Sounds like Mallya? Well, he was one but there are apparently many more taking inspiration from him.

Data on TransUnion CIBIL Limited, India’s first Credit information company reveals that as at 30^th June 2017, there were 5416 willful defaulters  of Rs.25 lakh and above across India. Their default/outstanding is to the tune of over some Rs.63,000 crore. The maximum number of willful defaulters hail from Maharashtra at 1275, followed by 474 in Delhi, 437 in West Bengal, 412 in Andhra Pradesh.

Out of this over 5400 willful defaulters, over 4200 were from the PSU banks and the maximum of these, over 960 accounts were from Punjab National Bank, followed by Central Bank of India and Union Bank of India.  In the private sector bank, Axis Bank reported the maximum number of willful defaulter accounts and the least were in J&K Bank.

At the end of FY17, there has been around 10% increase in the number of willful defaulters on an annual basis.

So who is a willful defaulter? In layman terms, what this means, to you and me is someone who has willingly not repaid the bank loans though he/she could have. This is right though RBI has put forth a very ‘legal’ definition stating that a willful default broadly covered the following:

a) Deliberate non-payment of the dues despite adequate cash flow and good networth;

b) Siphoning off of funds to the detriment of the defaulting unit;

c) Assets financed either not been purchased or been sold and proceeds have misutilised;

d) Misrepresentation / falsification of records;

e) Disposal / removal of securities without bank's knowledge;

f) Fraudulent transactions by the borrower.

The sticking of this tag to a person or company is like a red herring. It means the tap of all further loans, be it from any bank or even registered NBFCs, is tightly screwed shut. And it’s not just for the immediate short term; five years after this declaration, no new venture of the promoter or the company can be funded by any bank or financial institution.

RBI issued further clarification that companies in a group will be reckoned as willful defaulters if guarantees furnished by them on behalf of the willfully defaulting units are not honoured when invoked by the banks/financial institutions. In simple language, this means that the guarantor, if he also does not clear the dues despite having the cash, then he too will be declared as a willful defaulter.  

RBI has also stipulated that a borrower can be declared a willful defaulter if it was found that borrowed funds were used for purposes other than for which the loan was availed for. In that case, more than 50% of India Inc could be termed as willful defaulter!

This is what infuriates the most. If a common man misses one or two EMIs, that too it could be a measly sum of less than Rs.1 lakh, he faces the threat of becoming homeless. Here, we have one man looting the country of over $1 billion and he jets around scot free, enjoying the high life. What kind of a country are we living in? Isn’t this capitalism? So we should all stop kidding ourselves that India has a socialist bent. If a country makes its policies, Budgets, bends rules to accommodate the rich and famous, how can we call ourselves as an ‘inclusive’ country. Let’s face it – we are a country which just borders on socialism; overall, all our attitude reeks of capitalism. Nothing wrong in that; except that we should then stop calling ourselves socialists.

Willful default should be declared a criminal offence. For more details on Suit-filed accounts (Willful Defaulters) of Rs. 25 Lacs and Above as on 30-Jun-2014, go to the following link and click on each individual bank name mentioned and then the branch: https://suit.cibil.com