dna special: They have money, but won't repay - Corporate biggies gobble up Rs23,802cr loans

Thousands of individuals and companies have defrauded banks by defaulting on their loans, totalling Rs23,802 crore, even though they have the money to settle their dues.

Amount in question is enough to fund the country’s mid-day meal scheme for two years

As on March this year, 3,575 companies and individuals, who have taken loans of Rs25 lakh or more, were declared ‘wilful defaulters’ for not repaying their loans despite having adequate money, according to information obtained from the Credit Information Bureau India Limited (CIBIL), a banks-promoted agency for managing information of defaulters.

Maharashtra tops the list, with 737 companies and individuals owing about Rs7,000 crore to various public and private sector banks. On its heels are West Bengal and Andhra Pradesh, with dues of Rs2,080 crore and Rs1,980 crore, respectively.

A borrower who fails to repay a loan despite having the capacity to do so or diverts the money or siphons it off is declared a wilful defaulter. A borrower is declared wilful defaulter only after many rounds of consultations and negotiations. The bank gives details of wilful defaulters to the Reserve Bank of India every three months.

Nationalised banks bear the brunt of such frauds. A total of 72% of the money corporates defaulted on were borrowed from these.  State Bank of India alone has to recover Rs9,580 crore 41% of the total dues of all wilful defaulters.

“Huge amounts are siphoned off by big corporates every year from the hard-earned profits of banks,” claims Vishwas Utagi, secretary of the All-India Bank Employees Association. “Banks only initiate court proceedings against small defaulters. Why are the names of big defaulters not published?”

Some of the biggies that figure on CIBIL’s list are Hyderabad-based Deccan Chronicle Holdings Limited (Rs342 crore), Surat-based JB Diamonds Limited (Rs314 crore) and Chennai-based Paramount Airways Private Limited (Rs139 crore). Other well-known companies such as ITC Agrotech Limited (Rs2.08 crore) and Ruia Cotex Limited (Rs2.9 crore), a Ruia Group company, have also defaulted on their loan payments.

While most companies failed to respond to queries, ITC Agrotech Limited claimed that it does not have any “outstanding” due.

A spokesperson from the Ruia Group said the company has been “wrongfully” declared a wilful defaulter. “The company challenged it before the debt recovery tribunal, where it succeeded, and the bank’s revision petition in the Calcutta high court was also dismissed,” says Dhrubajyoti Nandi, vice-president, Corporate Communications, Ruia Group.

The amount mentioned here only refers to those cases in which the banks have initiated court proceedings for recovery of dues.

“In several cases, banks do not even report the dues to the CIBIL due to political pressure and a nexus between bankers and officials of defaulters,” alleges Rajesh Goyal, a former banker with a leading nationalised bank who now runs an independent, banking watchdog website — www.allbankingsolutions.com

The rate at which these corporates have managed to swallow public money is phenomenal. While in 2002, the dues of wilful defaulters were Rs6,291 crore, it grew four-fold over the next 10 years to Rs23,802 crore (see box 2).