From diamond merchant Mehul Choksi’s Rs 8,048 crore to flamboyant tycoon Vijay Mallya’s Rs 1,943 crore, India’s banking system has in recent years suffered massive blows on account of wilful defaulters, or borrower who do not repay despite having the capacity to do so.
Yet, state-owned banks in the country continue to put up a poor show when it comes to recovering their money.
Over the last three years, state-owned banks in India have recovered just Rs 10,107 crore from wilful defaulters, according to a reply filed by the minister of state for finance Anurag Thakur in the upper house of Indian Parliament on September 20.
This is worrisome given the top 50 wilful defaulters in India had together robbed banks in the country of around Rs 68,000 crore until September 2019.
What is even more worrying is that the government-owned banks have the worst track record when it comes to making recoveries.
The bad loans of public sector banks have surged from Rs 2.8 lakh crore in March 2015 to Rs 7.2 lakh crore in March 2020, as per the latest data available.
The bad loans of state-owned banks since 2015
|Allahabad Bank||Rs 8,358 crore||Rs 15,385 crore||Rs 20,688 crore||Rs 26,563 crore||Rs 28,705 crore||Rs 32,150 crore|
|Andhra Bank||Rs 6,877 crore||Rs 11,444 crore||Rs17,670 crore||Rs28,124 crore||Rs 28,974 crore||Rs 30,951 crore|
|Bank of Baroda (BoB)||Rs 16,261 crore||Rs 40,521 crore||Rs42,719 crore||Rs56,480 crore||Rs 48,233 crore||Rs 73,140 crore|
|Bank of India||Rs 22,807 crore||Rs 49,879 crore||Rs 52,045 crore||Rs 62,328 crore||Rs 60,661 crore||Rs 61,730 crore|
|Bank of Maharashtra||Rs 6,402 crore||Rs 10,386 crore||Rs 17,189 crore||Rs 18,433 crore||Rs 15,324 crore||Rs 15,746 crore|
|Canara Bank||Rs 13,040 crore||Rs 31,638 crore||Rs 34,202 crore||Rs 47,468 crore||Rs 39,224 crore||Rs 36,645 crore|
|Central Bank of India||Rs 11,873 crore||Rs 22,721 crore||Rs 27,251 crore||Rs 38,131 crore||Rs 32,356 crore||Rs 33,259 crore|
|Corporation Bank||Rs 7,107 crore||Rs 14,544 crore||Rs 17,045 crore||Rs 22,213 crore||Rs 20,724 crore||Rs 19,557 crore|
|IDBI Bank Limited#||Rs 12,685 crore||Rs 24,875 crore||Rs 44,753 crore||Rs 55,588 crore|
|Indian Bank||Rs 5,670 crore||Rs 8,827 crore||Rs 9,865 crore||Rs 11,990 crore||Rs 13,353 crore||Rs13,862 crore|
|Indian Overseas Bank||Rs 14,922 crore||Rs 30,049 crore||Rs 35,098 crore||Rs 38,180 crore||Rs 33,398 crore||Rs23,734 crore|
|Oriental Bank of Commerce||Rs 7,666 crore||Rs 14,702 crore||Rs 22,859 crore||Rs 26,134 crore||Rs 21,717 crore||Rs21,634 crore|
|Punjab and Sind Bank||Rs 3,082 crore||Rs 4,229 crore||Rs 6,298 crore||Rs 7,802 crore||Rs 8,606 crore||Rs8,923 crore|
|Punjab National Bank||Rs 25,695 crore||Rs 55,818 crore||Rs 55,370 crore||Rs 86,620 crore||Rs 78,473 crore||Rs 76,809 crore|
|State Bank of India (SBI)||Rs 56,738 crore||Rs 98,185 crore||Rs112,343 crore||Rs223,427 crore||Rs172,750 crore||Rs159,661 crore|
|Syndicate Bank||Rs 6,442 crore||Rs 13,832 crore||Rs 17,609 crore||Rs 25,759 crore||Rs 24,680 crore||Rs 25,330 crore|
|UCO Bank||Rs 10,186 crore||Rs 20,908 crore||Rs 22,541 crore||Rs 30,550 crore||Rs 29,888 crore||Rs 22,140 crore|
|Union Bank of India||Rs 13,031 crore||Rs 24,171 crore||Rs 33,712 crore||Rs 49,370 crore||Rs 48,729 crore||Rs 49,924 crore|
|United Bank of India||Rs 6,553 crore||Rs 9,471 crore||Rs 10,952 crore||Rs 16,552 crore||Rs 12,053 crore||Rs 11,457 crore|
The implementation of the Insolvency and Bankruptcy Code in 2017 has reduced the time taken for the resolution of bad loans to 340 days on an average compared to 4.3 years earlier. Yet, a deeper look at the numbers reveals banks’ bid to recover money from defaulters is still getting hampered.
Bank bad loan recoveries
The realisations or recovery rate, which means the amount of money which lenders received in comparison to what they had claimed in the court, has dropped sharply as big-ticket cases have reached a resolution and Covid-19 slump worsens.
Lenders are struggling to recover money in small and mid-sized cases as there is a lack of interest from investors.
The recovery process slowed down during the April-June period, in fact, due to the Covid-19 outbreak, according to IBC data examined by CARE Ratings.
In the June quarter, the number of new cases admitted in the National Company Law Tribunal declined by 75% year-on-year. The CARE report also states that the recovery rate in the June quarter (when the lockdown was in place) stood at 30.2%, which is way lower than 64% in the previous quarter. “This can be attributed to the nation-wide lockdown coupled with (the) suspension of (the) fresh bankruptcy proceeding for Covid-19 defaults,” CARE said.
At the same time, the economic decline triggered by Covid-19 is leading to a lack of investor interest and deferment of payments, as per ICRA Ratings.
These numbers put together reveal that lenders are still struggling to recover money from fraudsters.
This article first appeared on Quartz.