Banks are yet to file criminal cases against borrowers and promoters in 1,080 cases of wilful default accounts involving an amount of Rs 7,673 crore as of September 2016 despite the Reserve Bank instruction to them to launch legal proceedings including criminal action against wilful defaulters. In response to a RTI query on wilful defaults filed by The Indian Express, the RBI said, “the amount outstanding in respect of wilful defaulters of Rs 25 lakh and above pertaining to non-suit filed accounts is Rs 7,673.60 crore as reported by banks and financial institutions to credit information companies as on September 30, 2016.”

This means banks are yet to file criminal charges against 1,080 wilful defaulters who siphoned off funds or are yet pay up despite having the capacity to pay up. The non-suit filed wilful default accounts were Rs 12,351 crore involving 1,654 accounts in September 2014, the Reserve Bank of India said. However, the RBI declined to divulge the top ten wilful defaulters saying that the matter is in the Supreme Court. “The information requested by you is confidential in nature under Section 45E of the RBI Act 1934. Moreover, in a pending case (Centre for Public Interest Litigation vs Housing and Urban Development Corporation and others), the RBI has submitted to the Supreme Court a list of wilful defaulters of above Rs 500 crore in a sealed cover claiming that the said information is confidential in nature and requesting that it may not be revealed to the public,” the RBI said in the RTI reply.

“The matter is still under consideration of the Supreme Court. We are therefore unable to provide the information,” the country’s central bank said. According to Cibil (formerly Credit Information Bureau (India) Ltd), banks and FIs have filed suits against 7,873 wilful default accounts involving an amount of Rs 85,161 crore as of September 2016 as against 6,638 accounts involving Rs 63,837 crore in September 2015. State Bank of India has topped the list with 1,007 suits to recover Rs 13,761 crore. It was followed by Punjab National Bank with suits against 802 borrowers for recovery of Rs 10,082 crore and Central Bank of India 654 accounts for Rs 3,975 crore debt. “We are vigorously pursuing recovery of stressed assets. With the proposed strengthening of recovery measures, this problem is likely to be tackled,” said the CEO of a nationalised bank.

The RBI has said there is scope even under the existing legislations to initiate criminal action against wilful defaulters depending upon the facts and circumstances of the case under the provisions of Sections 403 and 415 of the Indian Penal Code (IPC), 1860. “Banks are, therefore, advised to seriously and promptly consider initiating criminal action against wilful defaulters or wrong certification by borrowers, wherever considered necessary, based on the facts and circumstances of each case under the above provisions of the IPC to comply with our instructions and the recommendations of JPC,” it said When asked about the measures to be initiated by the banks and FIs against the wilful defaulters, the RBI said, “no additional facilities should be granted by any bank/ FI to the listed wilful defaulters.

In addition, such companies (including their entrepreneurs/ promoters) where banks have identified siphoning or diversion of funds, misrepresentation, falsification of accounts and fraudulent transactions should be debarred from institutional finance from the scheduled commercial banks, financial institutions, NBFCs, for floating new ventures for a period of 5 years from the date of removal of their name from the list of wilful defaulters as published by RBI or CICs.”

“The legal process, wherever warranted, against the borrowers/ guarantors and foreclosure for recovery of dues should be initiated expeditiously. The lenders may initiate criminal proceedings against wilful defaulters, wherever necessary,” the RBI said. Wherever possible, the banks and FIs should adopt a proactive approach for a change of management of the wilfully defaulting borrower unit, the RBI said, quoting from the notification issued to the banks.

Further, a covenant in the loan agreements, with the companies to which the banks/ FIs have given funded/ non-funded credit facility, should be incorporated by the banks/ FIs to the effect that the borrowing company should not induct on its board a person whose name appears in the list of wilful defaulters. In case such a person is found to be on its board, it would take expeditious and effective steps for removal of the person from its board, the RBI said.

Total bad loans of 41 banks stood at Rs 7 lakh crore in the December quarter of FY17, up 60 per cent from the same period last year. According to RBI’s Financial Stability Report (FSR), the gross non-performing asset (NPA) ratio climbed to 9.1 per cent in September, 2016 from 5.1 per cent in September 2015.#casansaar (Source - Indian Express)