As India’s giant NPA crisis remains unresolved, newspaper reports say that the government has initiated steps to punish the wilful defaulters, who have looted India’s banking system and have brought it to a halt. It says that the Department of Financial Services of the Ministry of Finance has directed public sector banks to publish the names of wilful defaulters, who have collective unpaid dues of over Rs.1 lakh crores. It expects this move of naming and shaming defaulters, whose photograph, name and outstanding dues will be published in newspapers, to act as a deterrent to borrowers who do not repay. While so far, under the Reserve Bank instructions, the names of these defaulters were merely put in public domain, their naming and shaming in public media will now be made compulsory. As of 31.3.18, there were 9063 wilful defaulters with dues of over Rs.1.10 lakh crores. Strangely while the government is keen to name these defaulters, the RBI has been reluctant to give the names of wilful defaulters, despite orders of the Supreme Court, attracting charges of contempt of court. According to us, the number of wilful defaulters in India are much more than these, that the banks claim at present.
Wilful defaulters are those bank borrowers, who have the resources, but are not willing to repay the bank loans. They are typically those promoters who have become billionaires by bankrupting their companies. They are cheats who have duped banks, by siphoning away money from their companies and have parked them into entities and assets, beyond the reach of banks and the Indian law. So the funds that these companies borrowed from banks are no longer with them and have been squirrelled away by these dubious promoters. For perpetrating such frauds, the borrowers need the support of the auditors, who do not report these bogus transactions and the siphoning of funds. These auditors as we see in the case of the ILFS defaults, are aware of the frauds committed by the promoters, but choose to keep quiet, of course for a price.
Such wilful defaulters are white collar criminals, who have deliberately committed such frauds, and have knowingly violated the banking law, criminal laws, the income tax and other laws, to commit such crimes. They have taken such huge risks of being penalised and prosecuted, obviously out of greed and lure for the loot and we think that this proposed naming and shaming by banks makes no difference to them whatsoever. Wilful defaulters enjoy their ill gotten loot and are the least bothered about being named/shamed. It certainly does not scare them. While wilful defaulters cannot be generalised as belonging to one region, section of society or the economy, it is yet seen that a majority of them belong to the gems and jewellery industry, confirming the ease with which diamond traders illegally siphon money abroad, through hawala, bogus exports, imports etc.
If India wants to resolve its humongous NPA crisis, it will need a two pronged approach against these wilful defaulters. Banks will need to initiate criminal prosecution proceedings against these wilful defaulters, who are white collar criminals that have cheated the system and society and will also need to parallely initiate suitable action to attach their assets and recover bank loans. Unless stringent criminal action is not taken against these fraudulent borrowers, neither will banks be able to recover their funds and nor will such criminals be punished, which is a must. If such borrowers are arrested and jailed there will be a faster recovery of bank dues, apart from justice being done.
But if wilful defaulters are to be punished, so should be the willing bankers, who out of their corruption, negligence and collusion, granted loans to these unworthy and undeserving borrowers and willingly looked the other side when the funds were being siphoned away. The reality is that if the bankers had not compromised their integrity, such borrowers would not have been able to avail of bank loans itself and the wilful defaults would have been nipped in the bud. If the government is keen to name and shame wilful defaulters, it must name and shame the willing bankers too
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