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State-run banks’ troubles increase as number of wilful defaulters goes up 14% in one year

Finance Minister Nirmala Sitharaman tells Parliament that the number of wilful defaulters who owe money to public sector banks has risen to 8,582 from 7,535.

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New Delhi: The number of wilful defaulters owing money to state-run banks rose 14 per cent to 8,582 in 2018-19 from 7,535 the year before, the Union Finance Minister Nirmala Sitharaman informed Parliament Monday.

In an alarming indication of how much the bad loan crisis has affected Indian banks, finance ministry data also showed that on a net basis, around 1,050 wilful defaulters were added in 2018-19.

Who is a wilful defaulter?

A wilful defaulter is any individual or entity who defaults on a loan repayment, despite having the capacity to do so.

The defaulter can be categorised as a wilful non-payer in three instances: If the act of defaulting is deliberate, or if the firm’s assets are siphoned-off by some other entity, or in instances of fraud.

Infographic by Soham Sen | ThePrint

Also read: Modi’s big growth plans for economy need a $190 billion bank loan clean-up

Thousands of cases

Over the past few years, the government has enforced stricter regulations to stop defaulting. But rise in the number of non-payers suggest that the problem is still unresolved.

Responding to a question in the Lok Sabha, Sitharaman said in a written reply: “Wilful defaulters have been acted against comprehensively.”

The finance ministry also stated that as of March 2019, recovery suits have been filed in 8,121 cases. In cases where secured assets are involved, 6,251 cases have been filed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Criminal proceedings have also been initiated through FIRs in 2,915 cases.

An amount of Rs 7,654 crore has been recovered from wilful defaulters in the past five years, the government added.

Steps to curb wilful defaulters

So far, the government has taken several steps to curb wilful defaulters. Some of these include placing lending restrictions on banks, stopping associated firms from raising funds from the capital markets, or being a part of the insolvency resolution process.

The government also enacted the Fugitive Economic Offenders Act to attach properties of those offenders who flee the country. Banks have been asked to name and shame defaulters and obtain passports of borrowers.

Some infamous wilful defaulters in recent years include liquor baron Vijay Mallya and jewellers Nirav Modi and Mehul Choksi.

Also read: Disclose names of big loan defaulters: Central Information Commission directs RBI

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