CORPORATE DEFAULTERS - ECONOMIC TERRORISTS BURNING A HOLE IN INDIAN BANKS
By Ruma Dubey
There has been so much news since the weekend and now today – first the much needed Railway passenger and freight rate hikes, then the Budget date on 10th July, hike in import duty on sugar from 15% to 40% with riders, forest clearance of projects to go online from 1st July. There were rumours of the Indian Govt receiving ‘information’ in black money from the Swiss Govt but the FM was quick to quell these as baseless rumours.
But the best news of all is undoubtedly the Govt telling state lenders that they need to strict action against the top 50 defaulters. Asking Banks to vex their muscles against the defaulting rich and powerful is a big thing – at least there is realisation that we all hold this perception that action is seldom taken against big industrialists who default on huge sums of money. Not only is no action taken but they are given more loans too!
But for me and you? Dare miss one payment on your EMI? It could be a payment of something as small as Rs.3000. Life could become hell! Penalties, poor credit score and difficulty in getting loans the next time; the troubles will follow you into your grave and beyond.
Although, if you are Vijay Mallya or Reddy of Deccan, Kasliwal of S Kumars, Zoom Developers or the Winsome group; you can pretty much get away with murder even though the loan default amount could be running in thousands of crores. Mallya did not pay salaries, he defaulted on loan and interest payments on several occasions and is sitting on debt of over $1 billion. He owes state banks some Rs.7000 crore. Yet, he is scot free, the lenders have almost reluctantly, after so many months decided to sell the KFA HQs in Mumbai and realise at least some of the money. But this is after banks kept on lending him more money despite knowing that he was defaulting, allowed good money to chase bad money and ultimately now all threatens to become bad. Ditto for Kasliwal of S Kumars – he owes the banks around Rs.3000 crore. UCO Bank took the bold step of naming and shaming but not much has come off it. It is funny sometimes – despite his name being shamed, published as a defaulter, there are many traders who look at S Kumars as a buying opportunity. How is that? Probably from the die-hard belief that nothing ever happens to the big and rich.
Banks on their part say that they send notices to these defaulters, and each notice is challenged in the courts. The companies engage the banks in a long process of litigation and counter litigation. And banks all agree to the same point – eventually there comes pressure from the higher ups, the Finance Ministry, to restructure the loans before they become NPAs. Thus the banks say that they want to recover but the ‘system’ does not allow them to do so.
The Govt has said the right thing today, asking banks to launch an offensive against the top 50 defaulters. But saying is one thing; will they be able to bring these rich guys to task? Ten days ago, there was news that the Govt is setting up a fast-track court for trying loan default cases of over Rs.100 crore. There are over 40,000 cases worth Rs 1.73 lakh crore pending before various debt recovery tribunals. These fast track courts are to have deadline - matters have to be settled within a given time frame. Also the courts will be given the power to auction personal assets of promoters to recover the money. This will be good if this can be worked out as currently we have a situation, where the promoter is personally very rich but his company is on the deathbed – Vijay Mallya.
These are measures on which the Govt is working and it is heartwarming to know that at least there is recognition of a problem and the fact that a deeply entrenched perception needs to undergo a radical change. Without fear of the law, no guilty will ever stop his crimes thus tough punitive actions should be the deterrent. The case of Sahara Chief, very big and powerful, is probably the first one in recent times where some faith has come in, that yes, even ‘they’ could get arrested. But this is indeed the kind of action required – surely Tihar jail has a lot more space! A VIP section can be created, where the big robbers can gather together and exchange stories.
Our faith is almost non-existent when it comes to recovering loans from the rich guys. That has been the history. So it would be very difficult to have much faith in these words of the Govt. We can only hope that the Govt walks the talk.