Banks swoop on wilful defaults

Banks have decided to get tough on wilful defaulters, defined as borrowers who have not repaid bank loans despite having the capacity to do so. Mahua Venkatesh reports. How they define wilful defaulters

Banks have decided to get tough on wilful defaulters, defined as borrowers who have not repaid bank loans despite having the capacity to do so.

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Saddled with rising bad debt, banks are moving to press criminal charges on such borrowers and have the Reserve Bank of India’s (RBI’s) support.

Nearly Rs11,000 crore funds are locked up with individuals or firms that have “wilfully” decided not to pay back loans. Some to them have even sold off assets pledged to get loans without informing the banks.

According to RBI’s definition, any entity that defaults on payments of loans worth more than R25 lakh despite having the repayment capacity may be deemed a wilful defaulter.

“The lenders may initiate criminal proceedings against wilful defaulters, wherever necessary,” said a RBI “master-circular” issued this month.

Last week, finance minister Pranab Mukherjee asked chairmen of the government-owned banks to tackle bad loans by devising “suitable strategies.”

Under the new rules, even defaulters who have agreed to a one-time settlement will not be able to escape criminal charges, although they will be freed of civil ones.

Most banks have committees of senior executives to scan chronic loan default cases

“We are monitoring the situation on a regular basis and we generally give the defaulters one chance to clear dues, though the wilful default committee will take a final call on pressing for charges,” M Narendra, chairman and managing director, Indian Overseas Bank, told HT.

“Banks will take appropriate steps to protect themselves as per the RBI guidelines,” Arun Kaul, UCO Bank CMD said. CH Venkatachalam, general secretary of the All India Bank Employees Association, said public sector banks had been for long lenient towards wilful defaulters.