Defaulters’ Field Day

 Field Day for Defaulters and Bankers face the music

This is based on a short Tamil story that appeared in ‘Dinamani Kadir’, a weekly supplement attached to the most respected Tamil Newspaper 'Dinamani', today, the 27th August 2023.

Logu : “Sekar, I am telling you time and again, that I do not have Rs.1000 (Rupees Thousand only), but you keep  on torturing me to give it some how”

Sekar: “ Okay Logu. At least give Rs.500 (Rupees Five hundred only) now. Very Urgent. I have some unexpected expenses. With the amount you give only, I have to manage, till I get the next month pay.”

Logu: Whichever way you ask: cry, beg or whatever. My answer is simple. I don’t have even five rupees. Please go.

Sekar, returning dejectedly, murmuring to himself: “It is six months, since I gave the loan to Logu. I am trying my level best to get it back. Initially, he was apologetic. Then, he was becoming tough. Not accessible. And now, even if I manage to trace him, so indifferent”

When I read the above story, I felt, as many of you might remind yourselves, that this runs akin to the story of a banker, who gave a loan and the results of his recovery efforts. At least prior to introduction of economic and financial reforms (1991), we experienced the apologetic and humble way of replies from defaulters. We even had the freedom to knock his door at any point of time, barge into his office during office hours or demand him back the bank’s money lent, even while we meet him in the road. Now the rules have changed even to a fair banker.  Timings are fixed (between 8 am to 6 pm or is it still shorter?). Do not call him on holidays. Do not make repeated calls to his mobile from different numbers. And if you raise your voice, you may be booked for harassment or causing mental stress. 

Post 1991 financial reforms, in the last thirty two years, the banking business went up leaps and bounds. Bank deposits now stand at Rs.192.36 lac cr. and banking credit is at a level of Rs.148.75 lac cr. (11th August 2023). So huge are also the amounts to be recovered from the defaulters. Including the amount that is written off over the last three decades by the bankers, I fairly bet that the amount due from the defaulters should be in the range of at least fifteen percent of the gross advances today. 

As the amount to be recovered piled up, both in numbers and volumes, Debt Recovery Tribunals were set up in almost all districts, Lok Adalats were expanded, Insolvency and Bankruptcy Code 2016 (IBC) was passed by the Parliament, NCLT (National Company Law Tribunal) and NCLAT (National Company Law Appellate Tribunal) were activated.   Asset Reconstruction Companies (ARCs) came into being, to take over bad loans, at a discount (Discount percentage exceeded the amount that was agreed to be settled!). But the amount to be recovered (forget the decrees obtained) keeps on multiplying, again by leaps and bounds (with huge delay in all legal set ups), like the deposits and advances. This is on the legal side. 

From the side of creditors viz. bankers, asset recovery branches/teams took over the 'loans in default' from branches, positions to head the recovery of defaulted money improved from a manager (recovery) (middle management grade level III) to General Manager/Chief General Manager or Deputy Managing Director depending on the size of the banks and the amount to be recovered. Probably, one fourth of total staff in the pay rolls of a bank, may be doing the recovery role only. Recovery agents were appointed. Loans were sold to ARCs and so on. Due to the role of recovery agents, some banks got the wrath of the regulator and the courts as well.

Incidentally, the rights of debtors are coming into the reckoning, more and more. Recently, Supreme Court ruled that a borrower, whose loan is in default/not paid in time, shall be 'heard' before declaring him as a 'wilful' defaulter' or treat his/the company's account as a fraud account. There was a saying in the 1990s that 'only the enterprises fail' and not the 'entrepreneurs'.  It appears so, if a resolution plan is approved under IBC, instead of a liquidation. Defaulters like Shri Nirav Deepak Modis or Shri Vijay Vittal Mallyas appears to enjoy legal protection, even in international courts. There are hundreds of NCLT cases, where the Committee of Creditors (CoC) spend sleepless nights than the borrowers involved, who appear to carry on as usual (happily?), with their other businesses.

When I was studying in the school and college, I firmly believed that laws and regulations were created to protect the innocent/rightful people/institutions from getting cheated by the other side of the public/institutions. I would like to continue that belief in the present and future also, notwithstanding what is the reality today.

Regards

V. Viswanathan

27th August 2023.

Comments

  1. Superb article Sir.
    Though it sounds lighthearted and laced with humour, one can feel the pain of Bank Officials.
    Our legal system is so long drawn that timely justice is denied to the Bank.
    The new CPC & CrPC ammendment bills introduced in Parliament seek to severely cut the inordinate time lag. Hopefully Bankers and creditors can see justice delivered in time.
    Regards

    ReplyDelete
  2. Last week, in NCR, a Rolls-Royce car hit a tanker from behind, caused the tanker to flip killing its driver and co-driver. The killed ones were quickly booked for rash driving. Bankers beware.

    ReplyDelete

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