This Is How China Deals With Bank Defaulters, Blacklists IDs And Passports
February 22nd, 2018
Coming down strictly on loan defaulters, the Chinese government has barred 6.15 million people from buying plane tickets and 2.22 million from travelling by high-speed trains. The ruling also prohibits the defaulters to apply for loans and credit cards, stay at luxury hotels and enrol their children at expensive schools. The defaulters would now have to take a tougher test to join civil services and would be charged higher for buying a car.
Measures taken by China to deal with the defaulters
China has blacklisted about 6.73 million bank accounts. Details of the defaulters that is, their name and ID, would be displayed on the government website. This was done for the first time in 2013 which had names of more than 31,000 defaulters. By 2017, this number has grown to about 90 lakh.
The Supreme People’s Court devised this plan of creating a website which contains the names and IDs of the “dishonest people” in an attempt to make them repay the debts.
The court’s enforcement bureau chief Meng Xiang said in the order to enforce the restriction and the name, ID, and passport information of the defaulters have been shared with the Airlines and the Railways companies.
Earlier, some of the defaulters tried dodging the restriction by using their passport as only their IDs were blacklisted. But with the blacklisting of passport, this loophole has been fixed.
According to the court’s directions, these restrictions are placed on “high-expenditure consumption” and “consumption not necessary to sustain normal life or businesses” for individual defaulters as well as legal representatives and CEOs of companies that default.
The Chinese government has also adopted the policy of “Name and Shame” with automatic messages being played whenever someone tries to connect the call to one of the defaulters. Names of the defaulters are also displayed in buses and lifts.
How effective are these restrictions?
The introduced restrictions have apparently given positive results. According to BBC India, fearing the consequences, about 10 lakh defaulters have voluntarily agreed to abide by the court’s directions.
In 2017, a defaulter who travelled first class was fined $15,000.
Companies now conduct checks, and people who feature on the defaulters’ list are denied employment. About 71,000 defaulters have been barred from serving in executive positions and about 5,50,000 loan and credit card applications of the defaulters have been blocked by the Industrial and Commercial Bank of China.
Some of the listed defaulters have also been demoted.
The fear of restrictions among the defaulters is such that some of them have reportedly undergone plastic surgery. One of the defaulters reportedly underwent plastic surgery to evade detection by the authorities.
India’s bad loans problem
Indian banking system is also reeling under huge losses caused by piling up bad loans. After Vijay Mallya, Nirav Modi and his uncle Mehul Chowksi left the country after dwindling an amount of Rs 11,360 from the Punjab National Bank. Soon after this, Bank of Baroda registered a case against Rotomac owner Vikram Kothari and his family of an alleged fraud of Rs 2,919 crore. Then came the news of Rs 7,000 crore bank loan default by Jatin Mehta of Winsome Diamonds. Apart from Kothari, none of the names mentioned has been caught and most of them fled the country. Indian banks have been unsuccessful in getting even a penny back. It is the need of the hour for India to overhaul its existing laws so that the defaulters do not escape without paying debts.