Over £10 billion was owed to banks as on September 30, 2017, by people or companies characterised as “wilful defaulters”. Entities unwilling to pay despite having the capacity to do so are categorised under the term. A leading agency analysed over 9,000 such accounts, to find that the top 11 debtor groups, each with dues of over £100 million together had over £2.60 billion outstanding to the banks.
Analysis of publically available data for suit-filed accounts (wilful defaulters) of Rs 25,00,000 and above shows Jatin Mehta-promoted Winsome Diamonds & Jewellery Ltd and Forever Precious Jewellery & Diamonds Ltd owed close to £550 million to various banks. Mehta is reported to be now a citizen of St Kitts and Nevis, a tax haven with which India doesn’t have an extradition treaty.
Mehta’s companies are followed by Vijay Mallya’s Kingfisher Airlines, which has to pay back over £300 million under this head. The third company in the list is Kolkata-based REI Agro, a company owned by Sandip Jhunjhunwala, which, according to news reports, was once listed in London and Singapore stock exchanges and was co-sponsor of an IPL team. This company owes £273 million.
Bad loans up 27% in last one year
Next in the list are the companies owned by Prabodh Kumar Tewari and his family members. The amount outstanding on Mahuaa Media, Pearl Studio Pvt. Ltd, Century Communication and Pixion Media Pvt Ltd is £241.6 million.
The other companies that owe more than £200 million and are unwilling to pay despite having the means, according to the banks, are Zoom Developers Pvt Ltd promoted by Vijay Choudhary, Reid & Taylor (India) Limited & S Kumars Nationwide Limited, both promoted by Nitin Kasliwal, and media baron T Venkatram Reddy’s Deccan Chronicle Holdings Limited. The data shows the alarming rate at which these bad loans are growing. In the past one year it has increased by about 27%. In the previous three years, it had increased by 38%, 67% and 35%, respectively. Thus, between September 2013 and September 2017, the amount has quadrupled from £2.84 billion to over £11 billion. While some of this would be due to interest being added each year, the quantum of the increase is too large to be entirely or even mainly due to that.
RBI defines “wilful default” as defaults done despite the borrowers’ paying capacity. Money diverted for purposes other than the specific purpose of finance, or siphoned off and hence not available as assets to the borrower also qualifies as wilful default. Borrowers who have sold fixed assets that they provided as collateral to secure the loan without informing the bank also come under this category.
The cumulative total of more than 50 companies or groups each with over £25 million of wilful default works out to about £4.80 billion. To put that in perspective, it is only slightly less than the government’s allocation of £5.28 billion for health in the 2018-19 Budget. Bank-wise analysis of the data shows that nationalised banks (excluding SBI and associates) constitute about 60% of this money. SBI and its associates account for one fourth of the total. Private sector banks have also declared over £1.40 billion as wilful defaults.
