Only names of ‘wilful’ defaulters must be made public

RBI Governor Raghuram Rajan on Tuesday underscored that the names of only ‘wilful’ defaulters should be made public.

His observation comes in the context of the RBI recently submitting in a sealed cover to the Supreme Court the list of defaulters owing ₹500 crore or more to public sector banks and also requesting that the names be kept confidential due to their “fiduciary relationship”.

The Governor emphasised that a distinction needs to be made between a wilful loan defaulter and a loan defaulter.

“Let me ask you, in this room, sometimes you may default on your credit card loan. Would you like that credit card default to be put up in public? You may have just forgotten (to pay). “If every time you defaulted and it was put up in public for everybody, your neighbours, relatives and friends to see, and no reason is given, you might have some concerns,” reasoned Rajan.

The Governor said: “Similarly, what we are saying is a default happens in business, sometimes not by your own fault. Again, I get a letter a day saying it is not our fault, demand is weak, prices are low, there is dumping going on by foreign countries, government permissions didn’t come through, SC ruling took away some of these assets because they said the allocation is null and void. There are a variety of reasons why a project gets into trouble.” To then put the promoter up for all to see that this person defaulted, without details of why the person defaulted as the details are sometimes hard for a lay person to understand because they are intricate, may be unfair.

“So, we have no problem if the intent is to publish the wilful defaulters list. That is where the promoter, in the eyes of the bank, has taken the bank for granted. The bank has gone through a legitimate process to declare a borrower a wilful defaulter. That can be made public,” said the RBI chief. He cautioned that when any act of default, without understanding why or severity, etc., is just put out for the public to consume, it may create both a loss of business as well as undue anxiety and panic and, therefore, chill business activity.

“And if you are a promoter why would you take any risk if at the slightest chance of default your name is put up in public for sure. I don’t think we want that kind of move,” said Rajan.