A wilful defaulter is somebody who has essentially not used the fund for the purpose it has been borrowed or he has not repaid when he can do so; he has siphoned off the funds or he disposed of the assets pledged for loan without the bank's knowledge.
Public sector banks have written off loans worth Rs 516 crore owed by wilful defaulters in the first half of the current fiscal, as per the data collated by the finance ministry. As part of this exercise, 38 loan accounts of wilful defaulters were written off the books of banks during April-September period of 2017-18, it said. Write-off in banking parlance means that the bank has made 100 per cent provision from its earning against that account. Following this, no-performing asset (NPA) is no longer part of its balance sheet. However, the write-off puts pressure on balance sheet of banks as it erodes operating profit. Since recovery in case of wilful default is very remote so the possibility of write-back in the future is also very little, said a senior bank official.
A wilful defaulter is somebody who has essentially not used the fund for the purpose it has been borrowed or he has not repaid when he can do so; he has siphoned off the funds or he disposed of the assets pledged for loan without the bank’s knowledge. If there is wilful default then where is the possibility of recovery, when the entire exercise was undertaken with a clear intention of default, the official said, adding that banks could only get few of their assets which have been disclosed. Recovery forms only minuscule part of the outstanding loan in most of the cases, the official added. The Reserve Bank of India in its direction to banks in 2015 said lenders should initiate legal proceedings wherever warranted, against the borrowers or guarantors and foreclosure for recovery of dues should be initiated expeditiously. The lenders may initiate criminal proceedings against wilful defaulters, wherever necessary.
The country’s largest lender State Bank of India (SBI) accounts for over 27 per cent of the total amount owed to public sector banks by wilful defaulters as of March 2017, according to the finance ministry data. As many as 1,762 wilful defaulters owed Rs 25,104 crore to State Bank of India (SBI) as on March 31, 2017, putting pressure on its balance sheet. Punjab National Bank (PNB) is next on the list with 1,120 wilful defaulters having outstanding non-performing assets (NPAs) or bad loans of Rs 12,278 crore. Together these two banks account for Rs 37,382 crore or 40 per cent of the total outstanding loans. Total outstanding loans due to public sector banks by 8,915 wilful defaulters amounted to Rs 92,376 crore.