ARMED WITH SUPREME COURT DIRECTIVE, BANKS ARE DEFYING RBI
By Nitya Chakraborty
Emboldened by the directive of the Supreme Court to the Reserve Bank of India that the Bank must reform its transparency guidelines and provide details on top wilful loan defaulters, the public sector banks have started the process of naming the wilful corporate defaulters without waiting for the RBI decision. The process has started with the UCO Bank and already other PSBs have started discussing the issue at the board level so that the managements can come out with the names of the wilful defaulters.
Recently, the Kolkata based UCO bank published the name of Yashovardhan Birla, along with his photograph in newspapers as a wilful defaulter because of his company failing to repay Rs. 67.65 crore for long and showing no intention to repay. This created a storm in the banking circles as the Finance Ministry and the RBI have been refusing to make public the list of big wilful corporate defaulters. On April 26, 2019, the Supreme Court heard a contempt plea regarding RBI’s refusal to divulge details of defaulters. The Court criticised the RBI and directed the apex bank to reform its transparency guidelines and provide these details to the public.
Two months have passed since then but the RBI has not come out with any follow up action on the Supreme Court directive while the affected public sector banks have started taking action without waiting for any fresh RBI directive. After UCO Bank, the UBI and the Syndicate Bank have discussed the issue and, many other bank boards will be shortly taking up the issue. They are impatient for taking action and going public with the names of the big wilful corporate defaulters.
Nearly 50 per cent – or Rs 4.5 lakh crore – of the total value of India’s non-performing assets (NPAs) are due to loans taken out by the top 100 borrowers, an RTI query filed by The Wire has revealed.
The Reserve Bank of India (RBI) said that as of December 31, 2018, loans taken by the top 100 borrowers created NPAs worth Rs 4,46,158 crore. This means that on average, each of the top 100 borrowers is responsible for NPAs worth Rs 4,461 crore. The RBI refused to provide details on who these top 100 borrowers are.
According to an answer given by the then finance minister in the Rajya Sabha on February 5, 2019, the total value of NPAs in scheduled commercial banks was Rs 10,09,286 crore as of December 31, 2018. Of that, the value of NPAs in public sector banks was Rs 8,64,433 crore.
This means that 44 per cent of the total NPA value is owed by just the top 100 borrowers. And if only public sector banks are considered, then 52 per cent of the total NPA value is owed by these top 100 borrowers. As of March 2019, 9.3 per cent of the total given loan amount had been declared as NPA.
The apex court said on April 26 that this was RBI’s last chance, and that if the bank still refused to provide details, action would be taken against the central bank for contempt of court. Yet, in response to the RTI filed by The Wire, the RBI refused to provide details on the accounts of the top 100 borrowers. It did not provide the names of the account holders, the amounts owed by them or the interest rates at which they have borrowed money. The RBI said that such information is not available.
The central bank said that it collects information regarding debt under Section 27(2) of the Banking Regulation (BR) Act 1949 and under Section 28 of the RBI Act, 1934. The RBI’s response said: “As per Section 28 of the BR Act, RBI can only disclose information collected under Section 27 (2) of the Act in such consolidated manner as it deems fit.”
The bank said that in terms of Section 45(E) of the RBI Act, RBI is prohibited from disclosing credit information except under certain conditions as stated in the Act.
The number of wilful defaulters in nationalised banks has increased by over 60 per cent to 8,582 in five years to March 2019, the government sources say. By the end of 2014-15 fiscal, the figure stood at 5,349. Rising consistently since 2014-15, the number of such borrowers increased to 6,575 in 2015-16; 7,079 in 2016-17 and further to 7,535 in 2017-18.
As per data reported by nationalised banks, till March 31, 2019, suits for recovery have been filed in 8,121 cases. In cases involving secured assets, action under the provisions of the SARFAESI Act has been initiated in 6,251 cases. Further, in accordance with RBI instructions of initiation of criminal proceedings wherever necessary, FIRs have been registered in 2,915 cases.
Besides, vide Sebi regulations, wilful defaulters and companies with wilful defaulters as promoters/directors have been debarred from accessing capital markets to raise funds, she said. In addition, the Insolvency and Bankruptcy Code, 2016 has debarred wilful defaulters from participating in the insolvency resolution process.
For effective action against wilful defaulters fleeing Indian jurisdiction, the Fugitive Economic Offenders Act, 2018 has been enacted to provide for attachment and confiscation of property of fugitive offenders and has disentitled them from defending any civil claim. (IPA Service)