March 18th, 2016
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Vijay Mallya is not the only one
Liquor baron Vijay Mallya has been in the headlines for a few weeks now for defaulting over Rs 7,000 crore of bank loans. 17 banks have given a loan to Kingfisher Airlines and United Breweries group owned by him. Now, a similar issue has surfaced in Kerala in which Dewa Projects – promoted by NRI K Venugopalan Nair – have been accused of defaulting loans worth Rs 600 crore from 14 banks causing major losses to nearly 100 investors. The 14 banks have formed a consortium now led by Union Bank, which is trying to recover some amount of the loans taken for launching a super luxury apartment in Kochi during 2005-06. The 100 individual investors who may have paid at least Rs 30-40 crore are also speculating a huge loss. Their only recourse to recover the money is by fighting the case in civil courts. Whereas, the banks are selling properties of Dewa Projects to do the same.
Dewa Groups had planned the luxury apartment project by constructing 400 apartments. But after eight years of loan defaults, they have only one incomplete tower. The actual data is far more appalling. The Credit Information Bureau of India Ltd (CIBIL) — a company set up by banks to collect defaulter information — has reported that there are 5,275 ‘wilful defaulters’ in the country and they owe the Indian banks Rs 56,521 crore which is 1.5 times the allocation Central Government’s made for agriculture and farmer welfare (Rs 35,984 crore) in this year’s Union Budget. Wilful defaulters are those who borrow from banks and deliberately do not pay their loans, despite their ability to do so. The amount that the banks owe from these wilful defaulters has grown nine-fold over a period of 13 years, which was Rs 6,291 crore in 2002.
Public Sector Bank On The Verge Of a Crisis
Public sectors banks have lent about 73 per cent of the loans. Few bank managers on condition of anonymity have also claimed that unpaid loans do not always get reported to CIBIL because their is a nexus between politicians and defaulters and that is the reason the corporates get easy loans from Public-sector banks as parliamentarians put immense pressure on this bank to lend loans to the corporates.
Not only wilful defaulter, the CIBIL list also shows that there are other 7,436 defaulters who owe banks RS 115,301 crore. The public-sector banks have bad loans or gross non-performing assets which have crossed Rs 4.04 lakh crore, which 450 per cent more than what it was in 2011. Non-performing asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.
NPAs create a lot of problems that can significantly affect the national economy. The RBI has given a deadline of March 2017 for all the banks to clean up their balance sheets and with the rising NPA’s it is going to be no mean task.
The Logical Indian is concerned over the rising NPA’s and its consequences on the banking sector and the economy. We feel many of the defaulters seem to have taken the rules and regulations for granted given the lack of accountability of the lenders and the defaulters. We request the government to take stock of the situation and deal with the defaulters with an iron fist.
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