In an effort to address the escalating issue of willful defaults, the Reserve Bank of India (RBI) has proposed new provisions, including compromise settlements for wilful defaulters, according to the RBI's Draft Master Direction. This move comes as data from TransUnion (NYSE:TRU) Cibil reveals a significant surge in wilful defaults in Indian banks. As of March 2023, these defaults had increased to Rs 353,874 crore (Rs 1 crore = $120,127) across 16,883 accounts.
Nationalised banks and the State Bank of India (SBI) accounted for 77% of these defaults. The major contributors include SBI with Rs 79,271 crore, Punjab National Bank with Rs 41,353 crore, and Union Bank with Rs 35,623 crore. Legal actions are currently underway against 36,150 Non-Performing Asset (NPA) accounts to recover Rs 926,000 crore.
The top 50 wilful defaulters owe Rs 87,295 crore to banks and financial institutions. The list of major defaulters includes Gitanjali Gems Limited, ABG Shipyard Limited, and Concast Steel and Power Limited.
In response to this situation, a Supreme Court order mandates lenders to offer borrowers an opportunity to represent themselves before declaring an account as fraudulent. This is in line with the Finance Ministry's report stating that the top 50 wilful defaulters owe Rs 87,295 crore to banks and financial institutions.
The RBI's provisional data also reveals that scheduled commercial banks have written off an aggregate amount of Rs 10,57,326 crore over the last five years. This information underscores the severity of the issue and highlights the need for proactive measures to mitigate wilful defaults.
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