Many questions are raised before me in market by well wisher of banks. One very question is why not banks publish the list of loan defaulters? I respond to this question as follows.
There are millions of NPA or bad loan accounts which if published in news paper, in one lot or in piecemeal will be of not much use and will not yield fruits. There are microscopic few readers of such list or such notices of default. Only publisher branch employees and hardly some bankers and some casual readers go through such notices. Otherwise such advertisement of defaults goes unnoticed for majority of readers. Even if some people read, it is not going to ensure repayment of bad loans. Had the borrowers been so much sensitive to his image and prestige he could have repaid the loan in time and the accounts could not have gone bad at all. It is a bitter truth that most of the bad borrowers are bad willfully and not due to reasons beyond their control.
It is worthwhile to mention here that some banks have started publishing the list of bad borrowers in local newspapers. But the fact is that readers are few and ineffective. Even notices published for possession of landed property under SERFACIA are hardly seen by readers. Publishing of such list normally become common in a few days and none will look at such list.
It is also true that banks too do not want to publish list of VIPs who are kith and kin or friends of VIPs. Besides many loan accounts in Banks become bad due to casual approach of bankers. Many loan accounts are bad only because they were disbursed by corrupt officers of banks after taking huge amount of bribe and ignoring norms of banks. It is also desirable to mention that many loan accounts become bad due to some genuine difficulties faced by borrowers. Many loan accounts become bad due to natural calamities, change in business environment beyond the control of borrower and change in government policies, sudden fall in demand of the product, due to technological up gradation and advancement existing product becomes useless and so on.
Whatever may be the reason of default, banks cannot ignore such huge defaults for longer period. In case of reason beyond the control of bankers, it is desirable that government extends helping hand and banks extend time or enhance credit facility or waive in some genuine cases. But as long as willful defaulters are not punished by police and also by courts in India in shortest period i.e. after commitment of default and within one year of such default, all actions by banks are eye wash. This is the reason that NPA of banks are rising year after year.
It is open secret now that actual NPA of all PSU Banks is at least ten times of what they have reflected (Rs.45000 crores )in their balance sheet. If hidden NPAs are revealed, I hope, total NPA will jump to at least five lac crores only in PSUs. And if NPA goes on increasing unbridled in the same fashion, there is no doubt to me that in a few years’ banks will face severe crisis endangering the very existence of many banks.
In USA about a hundred banks has gone bankrupt in the current years due to sub prime crisis. Indian government has from time to time infused capital in some of weak banks to save them from collapse; some of the weak banks have been forcefully merged with some other strong banks and some cooperative banks have been allowed to shut down their shutters. But how long such manipulation will help is a million dollar question. Hitherto banks use to either write off bad loans or provide for them or conceal them altogether so that their market image is good.
To improve the real health of banks, government will have to take hard steps to improve recovery of loans form bad borrowers, ensure time bound action in courts and by police to execute the court order. At the time management of the banks or the government or RBI supposed to monitor the activities of banks have to take proper steps to kick out corrupt officers, promote honest and effective officers, remove inactive officers from police and courts, make advocate accountable and punishable and many more such thing which hinders in creation of an atmosphere conducive for recovery of loan. Once the government becomes active, bank management show quick action on willful defaulters, culture of borrower will automatically change. For all these imaginative actions to become real, initiative have to be taken by politicians who are the root cause of many evils prevailing in government banks for decades together.
Danendra Jain
CAclubindia
