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To build watertight cases against wilful defaulters, State Bank of India is planning to create a database of such defaulters, highlighting the grey areas that they are taking advantage of.
Emphasising that his bank has been declaring borrowers as wilful defaulters for quite some time, PK Malhotra, Deputy Managing Director, said, “But there are many cases where we are not able to establish wilful default for want of evidence…
“There are certain grey areas. So, we will have a proper database within the bank where these grey areas will also be highlighted.”
A wilful defaulter, according to the Reserve Bank of India’s definition, is a borrower who deliberately does not pay his dues despite possessing adequate cash flow and good net worth and siphons off funds to the detriment of the defaulting unit.
Such a defaulter also sells off assets purchased with bank loans and wrongly utilises the proceeds, misrepresents/falsifies records, and resorts to fraudulent transactions.
Once a borrower is declared a wilful defaulter, he/she is debarred from accessing institutional finance. Also, banks and financial institutions can effect a change of management at the wilfully defaulting borrower’s unit and prevent the borrower and his unit from gaining access to the capital market.
Malhotra said: “We know that the fellow (borrower) has siphoned off money. But there is no proof in the sense that many cheques pass through the account, (and) many credits pass through the account.
“So, proper proof of this money having gone out, sometimes, is not available. Circumstantial evidence is there.”
So, the bank’s grievance redress committee (GRC), which is headed by a Managing Director, sometimes lets go off these people as adequate evidence has not been put up before it.
Emphasising that his bank has been declaring borrowers as wilful defaulters for quite some time, PK Malhotra, Deputy Managing Director, said, “But there are many cases where we are not able to establish wilful default for want of evidence…
“There are certain grey areas. So, we will have a proper database within the bank where these grey areas will also be highlighted.”
A wilful defaulter, according to the Reserve Bank of India’s definition, is a borrower who deliberately does not pay his dues despite possessing adequate cash flow and good net worth and siphons off funds to the detriment of the defaulting unit.
Such a defaulter also sells off assets purchased with bank loans and wrongly utilises the proceeds, misrepresents/falsifies records, and resorts to fraudulent transactions.
Once a borrower is declared a wilful defaulter, he/she is debarred from accessing institutional finance. Also, banks and financial institutions can effect a change of management at the wilfully defaulting borrower’s unit and prevent the borrower and his unit from gaining access to the capital market.
Malhotra said: “We know that the fellow (borrower) has siphoned off money. But there is no proof in the sense that many cheques pass through the account, (and) many credits pass through the account.
“So, proper proof of this money having gone out, sometimes, is not available. Circumstantial evidence is there.”
So, the bank’s grievance redress committee (GRC), which is headed by a Managing Director, sometimes lets go off these people as adequate evidence has not been put up before it.
Dilatory tactics
Referring to dilatory tactics resorted to by borrowers to stall recovery proceedings, Malhotra said, “When we send a show-cause notice, we have to statutorily give him (borrower) 15 days time to reply.
“On the 14th day, the fellow will come up with some frivolous kind of objection, which will vitiate the recovery proceedings. So, we again have to give him time (to reply).”
For example, there was this borrower, who said on the 12th day that all the enclosures are illegible. Now, many of the show-cause notices that banks send have 100-150 pages attached to them.
“Most of them (pages), to my eyes, are perfectly legible. But this guy says they are illegible. He will not point out which portion is illegible. However, we send the same lot, with better photocopy, etc., to him once again. Then again on the 12th or 13th day, he will come up with some objection,” explained Malhotra.
Then, just before the GRC meeting, the borrower will send a letter along with a medical certificate stating that he is hospitalised. Now, the GRC cannot meet everyday. So, the bank has to give the borrower another date for hearing.
“We are trying to get over this dilatory tactic by actually sending the Debt Recovery Agent to the hospital to find out if the borrower is there or not.
“This is to ensure that whosoever is required to come before the GRC, he comes. And if the person doesn’t show up, then based on available evidence, he is declared a wilful defaulter,” said Malhotra.
Source : The Hindu
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