Despite Modi government tightening the noose around the neck of wilful defaulters, the fraudulent borrowers continue to flourish unabated. Even, harsh measures haven’t deterred the borrowers to build personal wealth on public money and willfully avoid the repayment of borrowed money. Unfortunately, the clandestine active participation of “corrupt” bank officials and greedy politicians is more responsible for such willy-dilly bank dealings.
Otherwise, how is possible that as much as Rs. 1.50 lakh crore ($21.76 billion) worth of loans were given by state-owned banks to “wilful defaulters” in 2018-19. This information was given by the finance minister in parliament on Tuesday.
Interestingly, country largest state-owned State Bank of India extended the highest mount of Rs. 46,158 crore to wilful defaults. Another state-owned Punjab National Bank gave Rs. 25,090 crore Bank of India Rs. 9,890 crore loan to wilful defaulters.Under law, wilful defaulters are those firms or individuals who own large businesses and deliberately avoid repayments.
Remember, after tycoon Vijay Mallya, fugitive billionaire jeweller Nirav Modi and his uncle Mehul Choksi fled the country following exposure of scam after scam, government has taken some steps to tame fraudulent borrowers. Wilful defaulters are not sanctioned any additional facilities by banks or financial institutions, and they are debarred from launching ventures for five years.The government has debarred wilful defaulters and companies with wayward borrowers from accessing capital markets to raise funds or participate in insolvency resolution process
However, all these measure are post-lending and by that time wilful defaults are already well in place. No harsh measure is there to ensure that borrower with fraudulent intent are not at all entertained and only genuine people are accepted for lending. As such, nig question is: how to put an honest and transparent lending system in place. The present corrupt lending system is highly manipulated by the “greedy bank officials and willy politicians, One of the reasons for this is that board of state owned banks are packed with ruling class nominees and they serve as conduits and agents to the politicians.
I had an bitter experience of this. A few years back, I wanted to run a tourism project at my apple farm situated in a fascinating virgin site some 50 kms from Shimla. I approached almost all state-owned banks but was never entertained by bank officials on one pretext or the other. Somehow. I came in contact with a bank board director. But he wanted a fat cut out of the sanctioned amount. I had to drop the idea, Earlier, in eighties, a daily newspaper project by some enterprising journalists was turned down by the IDBI (state financial institutions has cleared it), the same bank which extended huge amount to almost defunct Vijay Mallya airline. Even for housing loans, you have to depend on builders or agents for financing and with their help, borrower can finance even litigated property.
Here, I wish to recall a Supreme Court ruling. Sometime back, the top court had ruled that failure to repay a loan is not a criminal offence unless there is a fraudulent intent.It said,“The mere inability of the appellant to return the loan amount cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction.
Apex court further ruled“The law clearly recognizes a difference between simple payment or investment of money and entrustment of money or property. Mere breach of a promise, agreement or contract does not, ipso facto, constitute the offence of criminal breach of trust contained in Section 405, IPC, without there being a clear case of entrustment,” it held in its ruling.
The point is that, it is not the merit and viability of the project that matter for lending by banks but how the palm of the bank officials are greased. And this is one of the main reasons. There many loopholes in the law and wilful defaulters take advantage of such escaping routes. The fraudulent intent is there right from the day one and bank official are well aware if this Unless. such activities aren’t checked, loot of state-owned banks will continue.