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Why India’s small rogue borrowers must be tracked

LiveMint logoLiveMint 18-09-2017

Kingfisher Airlines Ltd, Zoom Developers Pvt. Ltd, Winsome Diamonds and Jewellery Ltd and Varun Industries Ltd are faces of the rogue credit culture that has weakened the Indian banking system. These companies are defaulting on bank loans even though they or their promoters have the ability to repay, or they have siphoned off money, or put it to some other use than was agreed on with their creditors. Wilful defaulters, the central bank calls them.

But for every Kingfisher or Zoom that makes the news, there are 20 that don’t. Like a small fabric business in Ahmedabad, or a non-governmental organization (NGO) that gives micro loans in Palakkad, or a supplier of automobile parts in Karimnagar. They don’t make the news because the amounts they are wilfully defaulting on are puny compared to what a Kingfisher or a Zoom owes.

A dataset compiled by credit bureau TransUnion CIBIL Ltd shows that, as of 30 June, India had about 6,600 wilful defaulters, defaulting on about Rs75,000 crore, against whom banks have filed suit. Of these, 52% were defaulting on loans of up to Rs1 crore. In value terms, that’s only 2% of the total amount (see chart 1). Yet, they cannot be ignored as their collective numbers and patterns raise important questions about credit risk, due diligence and accountability.

Graphic: Mint

For example, among all banks, Axis Bank has the greatest number of wilful defaulters in the up-to-Rs1-crore loan bracket, and it’s also the only private sector bank in the top 10 list (see chart 2).

Graphic: Mint

Or, at a city level, Kolkata is number two in terms of default in this bracket, losing ground as an economic centre. Or how above 90% of the wilful defaulters in cities like Nashik and Jalandhar are in the up-to-Rs1-crore loan bracket (see chart 3).

Graphic: Mint

A closer scrutiny of this pool can offer insights into where bank systems failed and how these can be corrected. is a database and search engine for public data

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