If non-performing assets (NPAs) worth a whopping Rs two lakh crore weren't bad enough, the banking sector is staring at another uncertainty.
About Rs 70,000 crore, or a third of total bad loans, is locked in a legal battle, with suits being filed in at least 4,000 cases.
As on September 30, 2013, 4,085 cases involving Rs 70,637 crore were in courts, according to All India Bank Employees' Association.
Maharashtra tops the number of suits filed, with 1,076 accounts worth Rs 26,921 crore under judicial scrutiny. Delhi ranks the second with 484 cases worth Rs 10,055 crore. Andhra Pradesh is third with 413 cases worth Rs 6,525 crore and Tamil Nadu is fourth with 378 cases involving Rs 5,003 crore.
Which such litigation is soaring, the department of financial services in the finance ministry has set up a committee to recommend how the debt recovery laws could be strengthened.
According to sources, in case of State Bank of India (SBI), which had a bad debt of Rs 61,605.35 crore on its balance sheet in March end, NPA accounts worth Rs 4,327.56 crore are locked in a legal battle. Eighty such cases in Mumbai alone are under legal purview.
Kingfisher Airlines, which has defaulted majorly on bank loans and is likely to be declared a wilful defaulter by a consortium of its lenders, is also at loggerheads with two banks.
According to the Association, the company's loan account worth Rs 444.92 crore with Bank of Baroda (Maharashtra) and Rs 54.52 crore with Oriental Bank of Commerce (Karnataka) are being heard in the
court.
Meanwhile, SBI, which is the lead banker in the consortium of 17 banks that granted a Rs 6,000 crore loan to the airline, had roped in EY for a forensic audit of the company. Prior to the audit, the Central Bureau of Investigation had approached the SBI seeking the documents pertaining to the Kingfisher loan. SBI then had not shared the details earlier this year, saying Kingfisher's default was a case of business failure.
Similarly, Punjab National Bank's 58 NPA accounts in New Delhi alone have approached court. A senior PNB official told dna on condition of anonymity, "The legal cases in bad debt accounts will indeed prolong the recovery process and hurt the profitability of the bank. It is as if these guys first get loans sanctioned from us and then fight cases with us using our own money."
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