Big borrowers of India Inc default on Rs 47,000 crore loans

Pradeep Thakur, TNN | Dec 6, 2011, 04.31AM IST

NEW DELHI: Large borrowers, who took loans of Rs 10 crore or more, have defaulted on payments to the tune of Rs 47,000 crore, with banks not even pursuing cases to recover over half the amount.

Data available with the finance ministry shows that least 700 defaulters who had borrowed Rs 10 crore or more from public sector banks and cumulatively owe over Rs 26,000 crore have gone scot free despite not clearing their dues. In another 3,400 cases where loans are of the order of Rs 1 crore or more, the lenders have moved courts and tribunals to recover Rs 21,400 crore.

But there are still concerns over the way banks are using options such as one-time settlement scheme to recover the dues. Investigations have shown that in several instances, it was not a simple case of default but even cheating was involved. Bank executives failed to attach personal assets of directors of companies that had defrauded the banks, sources said.

In fact, in several cases, defaulters have gone ahead to get a second loan despite not clearing their past dues. These facts were brought to the notice of the Central Vigilance Commission by CBI sometime ago after many of its cases fell in the courts when bankers reached one-time settlements with its big defaulters.

In one such case in Patna, a PSU bank auctioned a mortgaged property at 20% of the valuation made by its experts. Investigation had revealed a conspiracy involving bank officials, valuators and the borrower as the property mortgaged was an agricultural land used as security against a commercial loan.

The finance ministry has now asked these banks to spruce up their balance sheets given the fact that nearly Rs 14 lakh crore of credit has been outstanding against big borrowers - those who have borrowed Rs 10 crore and above. There are over 22,500 borrowers who owe over Rs 10 crore to nationalized banks.

The RBI has refused to divulge the names of the defaulters against whom no suits have been filed, citing secrecy clauses.

To help the banks recover bad debts, the government has also brought in a bill seeking changes in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, and in the Recovery of Debts due to Banks and Financial Institutions (RDBF) Act, 1993.

The new bill seeks to provide mandatory registration of mortgages and is expected to help reduce the cost of funds for banks and also reduce NPAs.