Take action against wilful defaulters
We are delighted to hear the current president of FBCCI, the apex trade organisation of the country, call for the punishment of wilful defaulters of bank loans which, as of June this year, amounts to nearly one lakh crore—a rise of 11.80 percent in the last six months and 3.21 percent compared to last year. Defaulting bank loans or non-performing loans (NPL), has been with us for many decades now. Successive governments have treated them with kid-gloves and have thus allowed them to not only exist, but also grow to the present state. What is an aberration in any well run banking system anywhere else in the world has become a common practice in our case.
It is important to distinguish between defaulters and wilful ones. The former category are the product of circumstances and the latter create their own to justify not repaying the banks. It is the wilful defaulters—people who deliberately and in a planned manner do not pay their scheduled instalments—who create the havoc in the system. These people are playing with the depositors' money, making a mockery of the financial laws of the land and are essentially defrauding the depositors.
This paper has been waging a war against these elements who, we feel, have been given too many chances, too much flexibility and pampered in ways that have sent a wrong signal as to the seriousness of the authorities to deal with them. Time and again their loans were rescheduled, with each rescheduling interest rates being lowered or part of it written off and instalments made easier.
Each time a loan defaulter is allowed to go free we are disincentivising a genuine borrower who ends up repaying higher interest rates than the wilful defaulter. It is time we really become serious about reducing our NPLs. The rising trend is dangerous for the health of our banking system. We greatly appreciate the call of the FBCCI president but must point out that one time call will hardly remove the malaise. What is needed is concerted action by the business community and the banking sector working together for this national cause.