The country's leading public sector banks State Bank of India and Punjab National Bank together account for as much as 40 per cent of bad loans that are not being paid back by "wilful defaulters."
According to figures compiled by the Finance Ministry, SBI accounts for over 27 per cent of the total amount owed to public sector banks by PNB's share is at around 13 per cent.
As many as 1,762 wilful defaulters owed Rs 25,104 crore to State Bank of India as on March 31 this year, straining its balance sheet and limiting its capacity to extend loans to genuine investors. Punjab National Bank (PNB) is at the second spot with 1,120 wilful defaulters on its blacklist who have refused to pay back Rs 12,278 crore.
Total outstanding loans due to public sector banks by wilful defaulters amounted to Rs 92,376 crore, Finance Ministry data shows. A wilful default occurs when a borrower does not repay a loan despite having the capacity to pay or siphons off funds by disposing of assets without the knowledge of the bank, according to RBI.
The total outstanding loans by wilful defaulters rose to Rs 92,376 crore at the end of financial year 2016-17, from Rs 76,685 crore at the end of last fiscal 2015-16 which represents a 20.4 per cent increase.
During this time there has been a 10 per cent increase in the number of wilful defaulters to 8,915 at the end of March this year compared with 8,167 in the previous fiscal.
Out of 8,915 cases of wilful defaults, banks have filed FIRs (First Information Report) in 1,914 cases with outstanding loans of Rs 32,484 crore. RBI Governor Urjit Patel had on Saturday also blamed the weak lending discipline of banks for the huge burden of bad loans and said they would need to take haircuts as they tackle these sour debts.
There has been a large number of write-offs of bad loans as well. During 2016-17 as 27 public sector banks, including SBI and its five associates had written off Rs 81,683 crore, the highest in the last five financial years. The amount was 41 per cent higher than that in the previous fiscal.
In order to check incidences of wilful default, RBI has tightened the norms and made it clear that promoter of the defaulting company cannot escape from his responsibility even if he is not a whole time director.
According to the earlier guidelines, a bank could not label a non- whole-time director of a company as a wilful defaulter unless there was conclusive evidence that the individual was aware of the wilful default by the company and had not objected to it.
RBI has also allowed banks to name and shame wilful defaulters by publishing their photographs. Gross NPAs of the public sector banks rose to Rs 6.41 lakh crore at the end of March 2017 as against Rs 5.02 lakh crore a year ago.
RBI Governor Urjit Patel said on Saturday that state-run banks will need more capital to resolve bad loan problems weighing on their balance sheets.
Public sector banks account for 70 percent of all lending. Patel said that the regulatory challenges of tackling bad loans were compounded by the weak capital position of some banks, particularly those owned by the government.
Extra capital could be raised either by getting funds from the market, through the government diluting its stake in state-run banks or through additional government capital infusions.