State Bank of India (SBI), the largest bank in the country, is not leaving any stone unturned to put rouge defaulters on notice.
The Mumbai-headquartered bank, which is a natural lead banker in most of the lending to the corporate sector in India, has tagged over two dozen corporate borrowers as 'wilful defaulters' this year.
These are cases where the bank suspects borrowers have not paid up despite having money, have diverted bank funds for purposes other than stated initially, have siphoned off funds, or have disposed of charged assets bought from the bank funds.
The bank has already filed suits in the court for recovery of money, but these cases go on for years. Some examples of this are Vijay Mallya's Kingfisher Airlines and Mehul Choski of Gitanjali Gems, who have been in headlines for some time now. In 2018-19, the SBI has reported 163 cases of wilful defaults. The amount involved was Rs 13,718 crore. This amount is not the total outstanding debt amount from the defaulters, but the amount identified as diverted or siphoned off.
The cases of wilful defaults have risen big time in the current NPA cycle that started in 2014-15. The Reserve Bank of India (RBI) and introduction of Insolvency and Bankruptcy Code (IBC) have made an impact as banks are now increasingly resorting to forensic audits. Wilful defaults are now met with severe repercussions as bank funding window gets shut for the promoter and company forever.
The SBI's top 10 wilful defaulters include ABG Shipyard, Ruchi Soya, Coastal Projects, Kingfisher Airlines, KS Oil, ARSS Infrastructure, BS Limited, REI Agro, Surya Pharmaceuticals and Action Ispat and Power Ltd. Interestingly, the bank gets to know the diversion or siphoning of funds at a much later stage when the borrower defaults or is taken to bankruptcy court. The banks should be proactive in monitoring the end-use of funds right from the time of disbursement. The private equity model is the best where every rupee invested is monitored for the stated result or performance.
The RBI had earlier released a list of 30 major wilful defaulters after the Supreme Court directed it to make the names public. Some of the SBI's top defaulters, like Kingfisher Airlines, Ruchi Soya, REI Agro, also figured in the RBI's top 30 list. There are also some statistics released by credit bureau Transunion CIBIL where they reported the corpus of wilful default amount rose from Rs 40,000 crore some five years ago to Rs 1.20 lakh crore.