‘Wilful default should be treated as criminal offence’

All-India Bank Employees Association (AIBEA), India’s oldest bank employees union, is threatening to disclose the names of 7,000 wilful corporate defaulters this week. The union is also calling for a one-day strike on July 29 to protest against what they call “anti-people” banking reforms being pursued by the government.

Speaking to Bloomberg TV India , AIBEA General Secretary CH Venkatachalam says the government and the RBI should change the rules to make wilful default a criminal offence. People’s savings in banks should be used for national development, he said.

Can you elaborate on the extent of loans that went bad due to wilful default?

As of now there are about 7,000 accounts of wilful defaulters, which constitute about ₹70,000 crore.

How many banks are involved in putting this list together?

All the major banks are involved — about 30 banks.

What sectors do the top defaulters belong to?

It includes all the major industries such as infrastructure, steel and real estate.

Are you saying that this ₹70,000 crore is not being reported by banks as NPAs? What is the real issue behind it?

It is also NPAs. In addition, they are also classified as deliberate wilful defaulters who have diverted the money, misused the money and abused the loan with a purpose. The total loan will be more than ₹10 lakh crore, which are bad loans. Out of that, these are all identified as wilful default cases.

Do you think the banks are not doing enough in terms of flagging off the risks of these wilful defaulters?

The RBI says we have to identify (NPAs). In some of the cases, they are restructuring the loans and disguising them as good loans. Otherwise, banks are declaring wilful defaulters as such. But they do not tell outside.

People must know that somebody has misused the loan because they give the loan from people’s money. There must be transparency. People should know that somebody has taken a bank loan, and is deliberately defaulting like Kingfisher (Vijay Mallya). But there are 7,000 individual companies like him. Banks must publish the list of defaulters.

Normal, genuine default is possible because of genuine reasons. But when someone deliberately cheats a bank, they are treated in civil cases. This is a criminal offence and they must be declared criminal offenders and criminal action must be taken against them. Wilful default should be treated as a criminal offense in our country. The law must change. The RBI is not doing enough on that. The government is not doing anything on that.

The RBI has over time come up with various schemes such as Corporate Debt Restructuring (CDR), Strategic Debt Restructuring (SDR), and Sustainable Structuring of Stressed Assets (S4A) scheme recently. Are you saying that the banks are taking equity ownership and then disguising these loans as good loans?

Earlier, as per CDR, the loans were given in more instalments. Now, with S4A, the bank will ask borrowers — who default ₹500 crore or more — how much they can pay. Take the example of Mallya’s case. He had taken some ₹7,000 crore of loans. He says, ‘I can repay ₹2,000 crore’.

That ₹2,000 crore will be shown as loan and he will start paying interest on that. And the remaining ₹5,000 crore will be treated as equity investment of the bank in a company such as Kingfisher. It is no good because Kingfisher is not doing well and there will be no return of that investment.

Can banks control an ailing company? If the banks invest, they will become major shareholders. Banks are not able to do the banking job, will they be able to run Kingfisher or any other company. But the point is, they are trying to whitewash the whole thing. The question is: how do you recover the money?

Ultimately, the money is not coming. Why can’t we take criminal action against the wilful defaulters and recover the money?

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