Safeguard those who aren’t wilful defaulters

The latest plan for recovery of bad loans is a clear-cut roadmap for banks to follow, said local bankers. They agree that it does not have built-in safeguards if default is not wilful. However, they agree that Small and Medium Enterprises (SMEs) are critical for the economy and steps to safeguard their interests are necessary.

A senior official in one of the nationalised banks told DNA on the condition of anonymity that the latest RBI diktat does not differentiate whether the default if wilful or not and entrepreneurs unable to repay because of environmental issues or policy-related issues, as in case of Goods and Services Tax (GST) where the payment cycle is elongated, may stand to lose. He agreed that banks need to be flexible to allow genuine businessmen to take corrective measures.

However, it is prudent to follow the plan for accounts that were restructured on multiple occasions but there was no turnaround. He confessed that most borrowers have the intention to repay. Another banker said the number of defaulters is less but they are common across banks. “The willingness not to repay is relatively higher loans with thousands of crores of rupees. They often claim they are willing to repay loans but there are no cases of loans being repaid,” he said. On the contrary small borrowers are more diligent in repaying loans.

However, an official of another public sector bank said that genuine businessmen will get a fair chance to present their case inspite of the road map by RBI. “It is in the interest of all that borrowers are able to repay loans. Bankers will make all efforts to ensure that the loan does not turn bad,” he said.

WHO DEFAULTS?

• Bankers say the tendency to not repay loans is prevalent across all strata of borrowers independent of loan size..
   
• However, share of large wilful defaulters in total defaults is disproportionately higher, a banker said.