Bad Loans, NPAs, Willful Loan Defaulters: Are Indian Public Service Banks Facing Crisis?

Post demonetisation, Indian Public Service Banks are facing a crisis altogether. Added to that, they have come to the media forefront for all the wrong reasons. In the last year, the Vijay Mallya episode highlighted the helplessness of the nationalized banks. The very recent cases of Nirav Modi and Vikram Kothari have underlined loopholes in loan policy and existing willful loan defaulters who have escaped abroad.

On one hand businessmen of the caliber of Nirav Modi, Mehul Choksi has simply fooled the bank officials whereas Rotomac Owner Gaurav Kothari is presently being grilled by CBI Officials. Thus the whole scenario is not all positive for the Indian nationalized banks and definitely calls for closer introspection of the mode of action.

Mehul Choksi Socialpost

In the last few years, bad loans have doubled in India. This has been one of the main reasons behind economic slump. Most, unfortunately, the actual level of bad loans is higher than the official figures.

At the end of last economic year on May 31st, 2017 – nationalized banks have taken action against 5,954 willful defaulters under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act. Even State Bank of India has taken against 1,444 of such defaulters with an outstanding loan of Rs 20,943 crore. The remaining 20 banks have taken action against 4,510 willful defaulters with an outstanding loan of Rs 48,496 crore.

PNB Scam

Altogether outstanding loans due to public sector banks by willful defaulters amounted to Rs 92,376 crore. But this hasn’t changed the economic scenario altogether! Whatever be the case, a complete review of loan structure is needed as early as possible. The case of non-profitable assets (NPA)is also significant considering the evaluation of the assets. In some of the cases, the NPAs haven’t helped the bank revenue as well, creating indirect pressure on the taxpayers.

The new RBI decision to bring more struggling borrowers into bankruptcy proceedings needs to be closely looked upon. The credit provisions of the banks are scheduled to increase along with the duty of the banks to resolve debts of defaulters with 20 billion rupees.

RBI Socialpost

The new rules will somehow shoot up non-performing loans and provisions in coming months but will benefit the banks in the long run. But the real question lies in the management angle also. Do VVIPS get special treatment if they are willful defaulters? The heavyweight names of Vijay Mallya, Nirav Modi and other high profile culprits do highlight that.


As far as provisions of Indian Penal Code (IPC) is concerned, there is also the scope of stricter measures to be undertaken. Definitely, Indian banks are facing a tough time and the Finance Ministry to needs to work in fine tune in best interests of the economy.

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Ranabir Bhattacharyya is a Bengal based writer who concentrates on politics, international relations, economic and social matters