The Finance Ministry on Tuesday told the Rajya Sabha that top 50 wilful defaulters owe Rs 87,295 crore to banks and financial institutions. These wilful defaulters include fugitive Mehul Choksi’s Gitanjali Gems Limited, Rishi Agarwal’s ABG Shipyard Limited, REI Agro Limited, and Era Infra Engineering Limited. Of these wilful defaulters, top 10 owe a whopping Rs 40,825 crore to scheduled commercial banks (SCBs), Minister of State for Finance Dr Bhagwat Karad said in a written reply to the Rajya Sabha.
Citing Reserve Bank of India’s (RBI) provisional data for FY22-23, Karad noted that the SCBs have written off an aggregrate amount of Rs 10,57,326 crore during the last five years. "The Reserve bank of India (RBI) has apprised that the amount owed by top 50 wilful defaulters in SCBs was Rs 87,295 crore as on March 31, 2023," he was quoted as saying by PTI. Fugitive Mehul Choksi’s Gitanjali Gems is the biggest wilful defaulter as it owes Rs 8,738 crore to banks.
Gitanjali Gems is followed by Era Infra Engineering Limited (Rs 5,750 crore), REI Agro Limited (Rs 5,148 crore), ABG Shipyard Limited (Rs 4,774 crore), and Concast Steel and Power Limited (Rs 3,911 crore). Other wilful defaulters include Rotomac Global Private Limited (Rs 2,894 crore), Winsome Diamonds and Jewellery Limited (Rs 2,846 crore), Frost International Limited (Rs 2,518 crore), Shri Lakshmi Cotsyn Limited (Rs 2,180 crore), and Zoom Developers Private Limited (Rs 2,066 crore).
Karad further said that the Reserve Bank of India (RBI) advised Indian Banks’ Association (IBA) that banks should consider a compromise settlement with wilful defaulters/fraudulent borrowers without “prejudice to the criminal proceeding underway against such borrowers”. He also noted that the central bank said all such cases of compromise settlements should be vetted by Management Committee/Board of Banks.
He was referring to the RBI’s circular titled Framework for Compromise Settlements and Technical Write-offs dated June 8, 2023. This framework states that regulated entities (REs) may undertake compromise settlement or technical write-offs w.r.t accounts classified as fraud or wilful defaulter. These proposals have to be approved by the board of the regulated entities.
The Framework for Compromise Settlements and Technical Write-offs prescribes a minimum cooling-off period of 12 months as a general prescription for normal cases of compromises settlement. “The cooling period in respect of exposures other than farm credit exposures shall be subject to a floor of 12 months. REs are free to stipulate higher cooling periods in terms of their Board approved policies,” the RBI framework states.
Karad also mentioned that the provision enabling banks to enter into compromise settlement in respect of borrowers categorised as fraud or wilful defaulter has been the settled regulatory stance for more than 15 years. He, however, added that the compromise settlement is subject to the discretion of the lenders based on commercial judgements and not a matter of right for borrowers.
"RBI had advised IBA, vide letter dated May 10, 2007, that, banks may enter into compromise settlement with wilful defaulters/ fraudulent borrowers without prejudice to the criminal proceeding underway against such borrowers and all such cases of compromise settlements should be vetted by Management Committee/Board of banks," he said.
He further said that compromise settlement with borrowers classified as wilful defaulters or 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.
(With agency inputs)
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