Big borrowers from public sector banks are big loan defaulters

The Times of India: Thane: Monday, October 08, 2012.

That public sector banks are saddled with more than Rs 100,000 crore in bad loans, enough money to fund half of India's defence budget this year, is an open secret. What has come as a surprise, though, is the fact that big borrowers-those who owe more than Rs 10 crore but have not paid up on time-make up more than three quarters of the amount in default, data obtained through an RTI application revealed.

The high end loan-owners, most of whom are builders, manufacturers or managing educational or medical institutions, account for 78 per cent of bad banking across the nation, going by statistics provided by 26 nationalised banks to an RTI query by Thane resident Omprakash Sharma.

The affluent borrowers which total up to a miniscule 969 accounts, have collectively defaulted on their scheduled loan repayments exceeding Rs 78,000 crore to the lending banks as on December 2011. A vast majority of the defaulters -- 49.23 lakhs as on December 2011-- across the nation were responsible for a gross Non Performing Asset (NPA) of just over Rs 22,000 crore or a mere 22 per cent of the bad debts.

It means that people who borrow less pay more in interests and capital to the banks. But those who borrow more have no liability whatsoever to repay their loans. Any person who defaults on a small or medium loans taken for his house, car or any entrepreneurial venture has to face such humiliation from bank-appointed recovery agents and bank officials that it leaves an imprint on his psyche. However, people who virtually rob banks of crores of rupees go scot free despite all the half-hearted attempts by the banks to recover the amount,'' said Sharma.

Records reveal that India's largest bank, State Bank of India, has accumulated a gross NPA of Rs 32,534 crores as on December 2011 with a mind boggling 17.88 lakh accounts termed as defaulters five months back. Interestingly, the jumbo borrowers, who total up to just 370, have failed to repay the loans exceeding Rs 10,000 crore which is nearly 33 per cent of the total NPA of the SBI.

SBI's deputy general manager Gautam Banerjee, however, declined to share the names of the 370 big borrowers stating that it is personal information which is kept with the bank in fiduciary capacity and is exempt from the RTI act.

It is ironic that the bank is shielding people who defaulted on their trust and have used up funds from the public sector banks for personal gain or investments. However, it appears that the rule is different for other nationalized banks who have been more than willing to share the entire list of defaulters who have taken loans exceeding Rs 10 crore. The Allahabad Bank or the Bank of Maharashtra have been very open with this information and have given names and the outstanding amount of their big borrowers,'' Sharma said.

The banks who have high bad quality loans is the Punjab National Bank with an NPA of Rs 9,632 crores. Following close is Union Bank of India with a bad debt of Rs 7,615 crore out of which Rs 2,913 crore or 38 per cet funds have been defaulted by 93 big account holders.

Thane-based chartered account Yogesh Sharma said the NPA declaration by the banks does not mean that the borrowers are intending to cheat but circumstances outside their control have crippled them financially.

Inflation, economic slowdown, increase in interest rates are some of the contributing factors for such a large NPA base. However, the recent switch over by public sector banks to computersied system of identifying NPA from the previous relationship banking has added to the problem. Previously, the bank manager and staff knew the borrower and would consider his request to release some part payment so as to avoid his account to be tagged as NPA. In the present system anyone who defaults on repayment of interest for more than 180 days is blacklisted as NPA,'' he said.