Finance Ministry Reveals: Top 50 Wilful Defaulters Owe Banks Rs 87,295 Crore
As of March 31, 2023, the top 50 wilful defaulters in India, including companies such as Gitanjali Gems Limited, Era Infra Engineering Limited, REI Agro Limited, and ABG Shipyard Limited, collectively owe Rs 87,295 crore to banks and financial institutions. Among these top 50 defaulters, the top 10 owe Rs 40,825 crore to schedule commercial banks (SCBs), according to Minister of State for Finance Bhagwat Karad’s written reply in Rajya Sabha.
Additionally, during the last five financial years (up to FY 2022-23, based on provisional data from the Reserve Bank of India), SCBs have written off a significant aggregate amount of Rs 10,57,326 crore. This amount represents loans banks have declared as non-recoverable and taken off their balance sheets as losses.
Mehul Choksi’s Gitanjali Gems top the list, owing Rs 8,738 crore to banks. The other significant wilful defaulters include Era Infra Engineering Limited with Rs 5,750 crore, REI Agro Limited with Rs 5,148 crore, ABG Shipyard Limited with Rs 4,774 crore, and Concast Steel and Power Limited with Rs 3,911 crore in outstanding dues to banks.
The list further includes Rotomac Global Private Limited with Rs 2,894 crore, Winsome Diamonds and Jewellery Limited with Rs 2,846 crore, Frost International Limited with Rs 2,518 crore, Shri Lakshmi Cotsyn Limited with Rs 2,180 crore, and Zoom Developers Private Limited with Rs 2,066 crore in wilful defaults.
These figures highlight the significant financial impact of wilful defaults on the banking sector and underscore the importance of effective measures to address and prevent such ruins in the future. Efforts to recover outstanding dues and hold wilful defaulters accountable are critical for maintaining the stability and credibility of the financial system in the country.
As per the Minister of State for Finance Bhagwat Karad’s statement, the provision allowing banks to enter into compromise settlements with borrowers categorized as fraud or wilful defaulters is not a new regulatory instruction. This provision has been the established regulatory stance for over fifteen years.
The Reserve Bank of India (RBI) had guided the Indian Banks’ Association (IBA) in a letter dated May 10, 2007, stating that banks may engage in compromise settlements with wilful defaulters or fraudulent borrowers. This provision applies even if criminal proceedings are underway against such borrowers. The RBI recommended that the Management Committee or Board of banks review and approve all such cases of compromise settlements.
Furthermore, the option for compromise settlement with borrowers classified as wilful defaulters or involved in fraud is also covered in RBI’s Master Circular on Wilful Defaulters, dated July 1, 2015, and Master Directions on Frauds, dated July 1, 2016.
Based on the RBI’s June 8, 2023, circular, regulated entities can undertake compromise settlements or technical write-offs for accounts classified as fraud or wilful defaulter. Such settlements can be made without prejudicing ongoing criminal proceedings against the borrowers. However, all proposals for such settlements need to be approved by the board of the regulated entities.
As per the framework, there is a minimum cooling-off period of 12 months prescribed as a general guideline for normal cases of compromise settlements. It is important to note that this cooling-off period is applicable irrespective of the penal measures that may be applied to borrowers classified as wilful defaulters.
As per the RBI’s Master Circular on Wilful Defaulters, dated July 1, 2015, there are specific penal measures for borrowers listed as wilful defaulters. These measures include prohibiting any bank or financial institution from granting additional facilities to such borrowers. Furthermore, the companies associated with these wilful defaulters, including their entrepreneurs and promoters, can be debarred from accessing institutional finance for starting new ventures for a period of five years from the date of their removal from the list of wilful defaulters.
The framework aims to provide guidelines and a structured approach for dealing with cases of wilful defaults and fraud, while maintaining the integrity and accountability of the financial system. It establishes a framework for regulated entities to exercise discretion in undertaking compromise settlements or technical write-offs, with due consideration for the penal measures applicable to wilful defaulters.
In response to another question, Minister of State for Finance Bhagwat Karad stated that the public has benefited from the amalgamation of banks as it has resulted in enhanced access to banking services through a stronger and larger network. The amalgamated banks also offer greater financial inclusion for underprivileged individuals, a wider and customized range of banking and financial products and services, and an improved digital experience due to investments in technology.
In a separate response, Minister Karad revealed that a total of 66,069 frauds were reported in the financial year 2022-23, resulting in a loss of Rs 85.25 crore. In the previous financial year, there were 65,893 frauds reported with a financial implication of Rs 115.36 crore.
As part of its efforts to strengthen cyber security in the banking sector, the Reserve Bank of India (RBI) issued comprehensive circulars on the Cyber Security Framework for Banks in June 2016 and for Urban Cooperative Banks in October 2018. These circulars advised banks to establish a board-approved cyber security policy, outlining the strategy to combat cyber threats based on the complexity of their business and acceptable levels of risk.
To further enhance the cyber security posture of online transactions and prevent cyber frauds, the Indian Computer Emergency Response Team (CERT-In) regularly issues alerts and advisories regarding the latest cyber threats and vulnerabilities. These advisories provide guidance on countermeasures to protect computers and networks. CERT-In also actively tracks and disables phishing websites and collaborates with service providers, regulators, and law enforcement agencies to investigate fraudulent activities.
Regarding the JanSamarth Portal, which was launched to facilitate credit-linked government schemes, a total of 23,276 grievances have been received since its launch. Out of these, 21,250 complaints have been resolved in a time-bound manner, aiming to provide efficient support to those availing loans under the credit-linked schemes.
These initiatives reflect the ongoing efforts by regulatory authorities in India to strengthen cyber security measures and protect individuals and businesses from cyber threats and fraudulent activities. By providing comprehensive guidelines and support, the authorities aim to ensure a safer and more secure digital environment for financial transactions and interactions.
