Bank unions and the Indian Banks’ Association (IBA) are in favour of disclosing the list of wilful defaulters in a bid to name and shame those who are responsible for putting the banking system under strain. While the All India Bank Officers’ Association (AIBOA) says the RBI’s stand of not disclosing the names of all loan defaulters makes no sense, the IBA has taken a view that the names of only wilful defaulters should be made public.
“When the names of income tax defaulters can be published by the Income Tax Department, why can’t the RBI do the same in the case of loan defaulters? After all, borrowers are given loans from the deposits kept by the public in good faith with banks. Deliberately not repaying loans is equivalent to a criminal offence,” said S Nagarajan, General Secretary, AIBOA.
Nagarajan said it seems the reputation of those who loot public money has now become more paramount than the protection of depositors’ interest.
He noted, “We are staring at a grave situation where corporate defaulters’ names can’t be spoilt but public sector banks can be privatised because of non-payment of bad loans.”
The leader of the Left-leaning trade union alleged, “Corporate loan defaulters seem to be getting protection from the powers that be. Else, how can one explain the delay in revocation of passport of a large loan defaulter by the Ministry of External Affairs?
‘Unacceptable’“The defaulter has taken loans aggregating ₹9,000 crore and now wants to settle only half the amount. The banking system is getting subverted. This is something that is not acceptable.” A senior IBA office-bearer emphasised that not every defaulter is a wilful defaulter. So, only the names of those who have wilfully defaulted on their loans should be made public.
“Due to business cycles, there will be times when businesses may face liquidity constraints (for example, the government delaying payments to contractors executing infrastructure projects, certain permissions granted by the government getting revoked by courts, and demand slowdown), resulting in the loan account becoming overdue.
“Now, if such a business is facing genuine problems and is struggling to stay afloat, is it right to make public the name of the promoter as a defaulter? This will only compound his woes. His suppliers may stop giving him raw material on credit and this is a sure-fire recipe for disaster,” the official said.
The name of a promoter who is in default should be made public only when all efforts to nurse his unit back to health via rectification/ restructuring fail. Once recovery efforts are mounted, then issuing public notice becomes a must so that the defaulting borrower does not strip the assets.