Big corporate defaulters feel the heat from Supreme Court order

This is good news from the Supreme Court of India. Worried over government ‘inaction’ in connection with the recovery of bad debt amounting to lakhs of crores, the SC has ordered the Reserve Bank of India to share the list of big corporate defaulters who owe more than Rs.500 crore.
According to experts it can force the government to hunt down defaulters who have actually swindled public money in the name of corporate loans. The SC decision has already sent shock waves across business circles. The defaulters who were brazen enough to roam freely, unconcerned about their huge liability, are now shivering with fear. Dinesh Unnikrishnan in an article in “Firstpost” writes “It is fully within the rights of general taxpayers to ask questions on how the tax collected from them is spent."
Given that banks are going broke with ballooning bad loans and that majority of them (to be specific 70 per cent of the industry by assets) are government banks, which are capitalised every year by the government using taxpayers’ money, there is no surprise why the Supreme Court asked the RBI on Tuesday to hand over the names of big defaulters.
The court has asked the question, which millions of taxpayers would want to ask. Clearly, bank recapitalisation has become a major burden on the public exchequer."
Consider this: In the last eight years, the government has infused Rs 90,000 crore in India’s 27 public sector banks. This fiscal year alone, the government has so far infused Rs 20,000 crore out of the promised Rs 25,000 crore. This is part of the Rs 70,000 crore package the government has promised to government banks over the next few years to fill their funding gap for credit expansion, mandatory reserve requirements under Basel-III requirements and bad loan provisioning. Now, is this money used efficiently by banks? The answer lies in the balance sheets of these lenders."
According to “The Financial Express” the apex court also asked the central bank to provide within six weeks the list of companies whose loans have been restructured under the corporate debt restructuring scheme. Noting that there are major defaulters “who run empires” and continue to have a “lavish lifestyle”, a bench headed by Chief Justice TS Thakur and also comprising justices UU Lalit and R Banumathi asked for the list of defaulters to be placed before it in a sealed cover. The court wanted to know how state-owned banks and financial institutions were advancing large-scale loans without proper guidelines and whether there was adequate mechanism to recover them.
The court made RBI party to a PIL filed in 2005 by NGO Centre for Public Interest Litigation (CPIL) in which it had raised the issue of loans advanced to some companies by state-owned Housing and Urban Development Corporation (HUDCO). - SC wants to know how state-owned banks are advancing huge loans without proper norms and if there is adequate mechanism to recover them.
- 29 PSBs wrote off Rs 1.14 lakh crore of bad debts between fiscal years 2013 and 2015, higher than the total during preceding nine years.
- Finance minister, RBI governor recently viewed the extent of the problem should not be exaggerated, so as to lead to any panic As of September 2015, public sector banks (PSBs) accounted for 86% of the Rs 3.47 lakh crore non-performing assets (NPAs) with all scheduled commercial banks. This number has increased significantly in October-December of 2015 after the RBI mandated banks for an asset quality review that has severely hit many PSBs’ bottom lines due to reclassification of many accounts as NPAs to reflect the true value of the loans, reveals “FE” report.
Big corporate defaulters, like one-time liquor baron Vijay Mallya, are still leading lavish lifestyles. His bankrupt civil aviation venture Kingfisher owes over Rs.6000 crore to various banks. Even if all his properties are auctioned, not even one thirds of the loan amount can be recovered. Same is the case with several other corporate entities which have borrowed huge money for infrastructure, real estate and hospitality ventures.
Recovery mechanisms of banks are weak and most defaulters don’t bother to repay. Some manage an out-of-court “settlement” for a paltry sum. If the SC cracks the whip and does not allow such things, corporate defaulters will pay up or land in jail. As an angry citizen remarked, these defaulters are actually the biggest anti-nationals and deserve to be charged with “sedition”.