Banks to 'name and shame' guarantors for loan defaulters--Business Standard
9th July 2013
Tightening their noose on loan defaulters, banks have decided to 'name and shame' the guarantors of such borrowers as well by publishing their photographs and other details in newspapers and at notice boards of bank branches and community centres.
Banks, mostly public sector lenders, began publishing pictures of wilful loan defaulters in newspapers and at other places around the areas of residence of such borrowers earlier this year to induce them to pay up.
This exercise has now been extended to the guarantors of loan defaulters as well as part of efforts to build pressure on the borrowers to clear their dues and Allahabad Bank published one such public notice on Tuesday.
Interestingly, public sector banks are at the forefront of taking such measures and those already making public the photographs and other details of loan defaulters include the country's biggest lender SBI and UCO Bank, Allahabad Bank, Indian Bank and Indian Overseas Bank.
So far, the public notices issued by private banks mostly do not contain pictures of the loan defaulters or their guarantors, but they are also actively considering such 'name and shame' exercises, a senior banker said.
Allahabad Bank on Tuesday published the photographs of two guarantors as well in the newspapers as part of a public notice for sale of two properties mortgaged for the loan.
The borrower, a corporate entity, had failed to pay it dues and the total outstanding amount currently stands at over Rs 365 crore.
As a result, the bank has published the photographs of its two individual guarantors, as also the name of a group corporate entity, while inviting bids for the two properties -- one in Haryana and another in Mumbai.
SBI began publishing the pictures of its individual loan defaulters in March this year, while UCO Bank has also went public with the name, photograph and other details of a well- known industrialist for non-payment of loans by his company.
According to bankers, the photographs, names and addresses of the guarantors would be published in newspapers if the dues are not cleared within 15 day of the notice containing particulars of the original borrowers.
Some banks have also decided to prominently display the photographs and other details of the wilful loan defaulters at the branches in the locality of such borrowers.
Banks also expect such notices to act as a deterrent for others against any loan defaults.
As per RBI's regulations, wilful defaulters are mostly those who are found to be engaged in deliberate non-payment of the dues despite adequate cash flow and good networth.
Banks can also classify the defaulters as 'wilful' if the loans are utilised for purposes other than those previously stated, funds are siphoned off from the bank-financed activity, records are falsified, securities are disposed off without bank's knowledge and the borrower indulges in fraudulent transactions.
RBI has already put in place a system to disseminate credit information pertaining to wilful defaulters for cautioning banks and financial institutions, so that any further bank finance is not made available to such borrowers.
Credit Information Bureau India Ltd (CIBIL) also publishes a list of wilful defaulters involving defaults of Rs 25 lakh and above.
As per CIBIL database, there were a total of 123 suit- filed accounts of wilful defaulters, involving loan value of Rs 2,993.22 crore, as on December 31, 2012. Out of these, Tamil Nadu accounted for the maximum 25 such accounts, followed by 23 in Maharashtra, 16 in Kerala, 14 in Uttar Pradesh and 11 in Gujarat.
In terms of loan value, UP was on the top (Rs 990 crore), followed by Madhya Pradesh, Maharashtra, Tamil Nadu and Haryana.
CIBIL has also listed 516 cases of suit-filed accounts of Rs 1 crore and above as on December 31, 2012 and these cases together accounted for total loan value of about Rs 5,563 crore.
Banks, mostly public sector lenders, began publishing pictures of wilful loan defaulters in newspapers and at other places around the areas of residence of such borrowers earlier this year to induce them to pay up.
This exercise has now been extended to the guarantors of loan defaulters as well as part of efforts to build pressure on the borrowers to clear their dues and Allahabad Bank published one such public notice on Tuesday.
Interestingly, public sector banks are at the forefront of taking such measures and those already making public the photographs and other details of loan defaulters include the country's biggest lender SBI and UCO Bank, Allahabad Bank, Indian Bank and Indian Overseas Bank.
So far, the public notices issued by private banks mostly do not contain pictures of the loan defaulters or their guarantors, but they are also actively considering such 'name and shame' exercises, a senior banker said.
Allahabad Bank on Tuesday published the photographs of two guarantors as well in the newspapers as part of a public notice for sale of two properties mortgaged for the loan.
The borrower, a corporate entity, had failed to pay it dues and the total outstanding amount currently stands at over Rs 365 crore.
As a result, the bank has published the photographs of its two individual guarantors, as also the name of a group corporate entity, while inviting bids for the two properties -- one in Haryana and another in Mumbai.
SBI began publishing the pictures of its individual loan defaulters in March this year, while UCO Bank has also went public with the name, photograph and other details of a well- known industrialist for non-payment of loans by his company.
According to bankers, the photographs, names and addresses of the guarantors would be published in newspapers if the dues are not cleared within 15 day of the notice containing particulars of the original borrowers.
Some banks have also decided to prominently display the photographs and other details of the wilful loan defaulters at the branches in the locality of such borrowers.
Banks also expect such notices to act as a deterrent for others against any loan defaults.
As per RBI's regulations, wilful defaulters are mostly those who are found to be engaged in deliberate non-payment of the dues despite adequate cash flow and good networth.
Banks can also classify the defaulters as 'wilful' if the loans are utilised for purposes other than those previously stated, funds are siphoned off from the bank-financed activity, records are falsified, securities are disposed off without bank's knowledge and the borrower indulges in fraudulent transactions.
RBI has already put in place a system to disseminate credit information pertaining to wilful defaulters for cautioning banks and financial institutions, so that any further bank finance is not made available to such borrowers.
Credit Information Bureau India Ltd (CIBIL) also publishes a list of wilful defaulters involving defaults of Rs 25 lakh and above.
As per CIBIL database, there were a total of 123 suit- filed accounts of wilful defaulters, involving loan value of Rs 2,993.22 crore, as on December 31, 2012. Out of these, Tamil Nadu accounted for the maximum 25 such accounts, followed by 23 in Maharashtra, 16 in Kerala, 14 in Uttar Pradesh and 11 in Gujarat.
In terms of loan value, UP was on the top (Rs 990 crore), followed by Madhya Pradesh, Maharashtra, Tamil Nadu and Haryana.
CIBIL has also listed 516 cases of suit-filed accounts of Rs 1 crore and above as on December 31, 2012 and these cases together accounted for total loan value of about Rs 5,563 crore.
Chidambaram asks banks to cut lending rates, check rise of bad loans
Finance Minister P Chidambaram has asked banks to review their lending rates and urged them to focus on top loan defaulters and take action against them to check the rise of bad loans.
The minister met the heads of public sector banks and financial institutions in the national capital on Wednesday.
"Reduction in base rate will be powerful stimulus to boost credit growth," he told the banks, adding that unless the base rate is cut, interest rates cannot be brought down.
While the the Reserve Bank of India (RBI) has reduced the policy rates by 1.25 per cent since January 2012, to prop up growth, banks have lowered the lending rates by only 0.30 per cent during the period.
While noting that gross non-performing assets (NPAs) of PSU banks have risen from Rs 71,080 crore as on March 2011 to Rs 1.55 lakh crore as on December 2012, the finance minister urged banks to review their policy against loan defaulters and take action against them.
"You focus on the top defaulters, as well as keep on eye on the top performing accounts... They are keeping a close watch on the top 30 non-performing accounts in each bank and action will be taken on the defaulters," Chidambaram said.
The gross NPAs of some public sector banks, including State Bank of India and Punjab National Bank have crossed 4 per cent of the total assets at the end of March 2013.
Chidambaram also reviewed the credit to agriculture, Micro Small and Medium Enterprises (MSMEs) sector, housing, education, minority communities and also financial inclusion.
He further said that the banks would open over 8,000 new branches this year and hire over 50,000 people.
The minister met the heads of public sector banks and financial institutions in the national capital on Wednesday.
"Reduction in base rate will be powerful stimulus to boost credit growth," he told the banks, adding that unless the base rate is cut, interest rates cannot be brought down.
While the the Reserve Bank of India (RBI) has reduced the policy rates by 1.25 per cent since January 2012, to prop up growth, banks have lowered the lending rates by only 0.30 per cent during the period.
While noting that gross non-performing assets (NPAs) of PSU banks have risen from Rs 71,080 crore as on March 2011 to Rs 1.55 lakh crore as on December 2012, the finance minister urged banks to review their policy against loan defaulters and take action against them.
"You focus on the top defaulters, as well as keep on eye on the top performing accounts... They are keeping a close watch on the top 30 non-performing accounts in each bank and action will be taken on the defaulters," Chidambaram said.
The gross NPAs of some public sector banks, including State Bank of India and Punjab National Bank have crossed 4 per cent of the total assets at the end of March 2013.
Chidambaram also reviewed the credit to agriculture, Micro Small and Medium Enterprises (MSMEs) sector, housing, education, minority communities and also financial inclusion.
He further said that the banks would open over 8,000 new branches this year and hire over 50,000 people.
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