Expressing serious concerns over the rise in bad loans, the Supreme Court (SC) on Tuesday asked the Reserve Bank of India (RBI) to submit a list of big loan defaulters who owe more than Rs 500 crore.
The court has given the central bank eight weeks to submit the information in a sealed cover.
The direction was issued by a bench which was hearing a public interest litigation against Housing and Urban Development Corporation (Hudco).
The bench, headed by Chief Justice TS Thakur, expressed concern over the mounting bad debts of the banking system, pointing out at the irregularities in sanctioning huge loans to wilful defaulters in some cases.
Wilful defaults are pegged around Rs 3.75 lakh crore. According to bankers, that is three-fourth of the gross non-performing assets (NPAs). This is the list that bankers submit to RBI.
Senior bankers say that gross NPAs are classified under various heads like siphoning off funds, changing the end-use, round-tripping and bloating up assets. Banks exclude natural calamities and such genuine stress from the list. However, RBI has so far not given an official figure on wilful defaults of the banking sector.
To declare accounts or borrowers 'wilful defaulters', banks have to follow certain procedures like they would have to follow while initiating recovery procedures.
Meanwhile, leading corporate lawyers say that the whole issue may continue to be shrouded in secrecy as the information is sought by the apex court in a sealed cover.
While banks shield large borrowers by citing client confidentiality, retail borrowers of home, car and personal loans are put to shame by publishing their pictures in newspapers.
Rarely do banks put up names of large corporate borrowers even when loans taken by them are several times bigger.
Anil Harish, a leading corporate lawyer based in Mumbai, said: "When the supreme court has asked for the information, the RBI will have to give it. But a sealed cover means that the apex court may also not reveal it. The supreme court will study the list and see if there was proper due diligence undertaken to sanction the loans. Sometimes, loans do go bad due to poor due diligence. In other cases, there are genuine problems, like in the steel, mining or the real-estate sector, where external factors are central to the problems."
Well-known fraud cases that were handed over to the CBI in the last few years include Zoom Developers (with a debt of Rs 2,200 crore), Praveen Tayal Group's Jayabharat Textiles, Krishna Knitwear and Eskay Knit with loans of Rs 3,000 crore, Kolkata-based REI Agro (Rs 4,000 crore), Winsome Diamond (Rs 3,500 crore) and Electrotherm (Rs 434 crore).
Another leading lawer Rajesh Narain Gupta, said: "It is very good that courts are taking cognisance of default issues. It is certainly a deterrent for borrowers when the issues are being debated at the highest level. But the list should have been made public so that pressure mounts on defaulters. The supreme court is in sync with RBI governor Raghuram Rajan who wants to bell the big fish."
In the corporate debt restructuring scheme of RBI, there are 242 live cases with a total debt of Rs 2.5 lakh crore. About 21% of these have come from the iron and steel sector, with 52 companies having a debt of about Rs 50,000 crore, 19 infrastructure companies (Rs 42,823 crore), 12 companies in the engineering segment (Rs 25,484 crore) and 33 textile companies(Rs 15,800 crore), among others.
RBI deputy governor SS Mundra said at a conference last week that the borrowers do round-tripping by presenting the same collateral. For example, a diamond company presents the same stock of diamonds at its branches, say, in Mumbai, Dubai and Hong Kong and gets loans from banks."
Medium-scale industries showed the highest stress, with 31.5% of their loans being stressed; 23.7% of loans to large industries were stressed at the end of the second quarter ended September 30, 2015, said Mundra.
In December 2015, the SC, in a landmark judgement, had told the RBI that the banking regulator cannot withhold information citing 'fiduciary relations' under the Right to Information (RTI) Act.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "Supreme Court")
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}