Life Insurance Corporation (LIC) of India has reported Unitech to the Reserve Bank of India (RBI) as a wilful defaulter, a senior official at India’s largest life insurance confirmed.
Unitech, India’s fourth largest real estate developer, has defaulted on a Rs 200-crore loan it took from the insurance behemoth in 2007. News regarding the developer’s loan default first came out in December, when it claimed that it had agreed to pay Rs 70-80 crore to LIC.
When contacted by FE, Unitech stated that it stands by the statement it had issued to all stakeholders last week.
“...requisite steps have been taken by the Company to ensure no pendency with the Life Insurance Corporation of India that will be reflected in the financial results and/or financial statements, which are due at the end of this financial year,” Unitech had stated in a notification to the Bombay Stock Exchange on Friday.
Unitech has now joined the list of Indian corporates which have been identified as wilful defaulters by Indian banks due to delays in repaying loans.
One way the RBI defines a wilful default is when the unit has delayed on its repayment obligations even though it has the ability to pay the lenders. A wilful default is also declared when the unit has delayed repayment but has not used the funds for the specified purposes for which the loans were taken. Moreover, if funds have been siphoned off or if the moveable fixed assets or immoveable property underlying the loan have been disposed off by the promoter, without the knowledge of the lenders, it’s considered a wilful default.
In December, the central bank released a set of guidelines to curb the stressed assets in the banking system and outlined the treatment to be meted out to wilful defaulters. These steps would make it more difficult for such defaulters to get additional loans from banks.
Unitech’s income from operations for the quarter ended December 31 stood at Rs 398.98 crore, up 57% from a year earlier. The company’s net profit for the quarter was down 41% from the previous year, at Rs 23.10 crore.