LOAN DEFAULTERS..BEWARE...

Adopting a name and shame policy to make borrowers pay their dues, banks have decided to publish in newspapers photographs and details like names and addresses of wilful loan defaulters and market leader SBI has taken the lead in doing so. Besides, banks would also publish photographs, names and addresses of guarantors of such defaulters in newspapers if the dues are not cleared within 15 days 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 branches in the locality of such borrowers, a senior executive with a leading bank said. Taking the lead, State Bank of India has begun publishing photographs and other particulars of such defaulters and has published one such public notice in newspapers for five defaulters in the national capital. These persons had taken export credit loans of Rs three lakh each and their outstanding amounts were in the range of Rs 2.6 lakh to Rs 2.93 lakh. Executives at many other banks said that they would also publish the photographs and other details of their wilful defaulters in local newspapers circulated in areas of residence of such persons. As per RBI's regulations, wilful defaulters are mostly those who are found to be engaged in deliberate non-payment of dues despite adequate cash flow and good networth. Besides, banks can also classify 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 of without bank's knowledge and the borrower indulges in fraudulent transactions. RBI has also asked Credit Information Bureau India Ltd (CIBIL) to publish 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 one crore and above as on December 31, 2012 and these cases together accounted for total loan value of about Rs 5,563 crore. Bad assets Rs 1.83 trillion Slowdown in growth and high interest rates have resulted in a 42.6 per cent rise in bad assets in banking system to Rs 1.83 lakh crore till December 2012, CARE Ratings has said. The gross non-performing assets in the system have risen to Rs 1.83 lakh crore from Rs 1.28 lakh crore a year ago, witnessing a growth of 42.6 per cent. "Consistent high interest rates have impacted the debt repayment capacity of corporates thereby resulting in asset quality deterioration and rise in the quantum of restructured assets across the banking sector," CARE Ratings said. The agency also attributed the stress to subdued economic activity that dented top lines of corporates. The gross NPA ratio of the system has increased to 3.53 per cent in December 2012, as against the 2.88 per cent level in December 2011, it said. State-run banks contributed the maximum to the increase in NPAs, with a 48 per cent surge while the same for private banks stood at 10 per cent, CARE said. Gross NPAs as a percentage of advances moved up to 3.92 per cent versus the March 2012's 3.02 per cent for the public sector banks while for private banks, it dropped marginally to 1.97 per cent from the 2 per cent levels in March 2012. Restructured assets in the system have grown 23 per cent since March 2012 to Rs 3.2 lakh crore, or 6.1 per cent of the total advances, it said. The same ratio of restructured assets had stood at 5.4 per cent in March, 2012. However, in some solace for the sector, the ratings agency said it did not expect credit growth to fall below the expectations and expects the margins to remain stable in the near term. "Given the current economic scenario and the recent downward revision in estimated GDP growth to 5 per cent for FY13, we expect advances growth for FY'13 to be around 16 per cent, in line with earlier projections," CARE said, acknowledging that some impact of the growth slowdown has been witnessed in this area as well. In the near term, CARE expects the banking system's margins to remain stable as the rates are on a decline, it said. However, the agency added that during the first three quarters, "margins in the banking sector have been witnessing downward pressure on account of higher cost of deposits, deceleration in credit growth as well as interest reversals due to rising NPAs."