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Banks are right to declare defaulters

The decision to name and shame the loan defaulters by the banks is a step in the right direction. Unfortunately, it is rather sad that the banks had to resort to this last ditch method in order to retrieve the bad loans from defaulters, especially in the context of the non-performing assets rising sharply. According to reports, about 39 banks in India have reported a 36 per cent rise in their share of bad loans, amounting to a staggering Rs 1,79,431 crore as on 31 March 2013. In fact, Allahabad Bank was the first of the banks to take to this extreme measure, so as to force the unscrupulous and heedless borrowers into returning the sums that they have taken from the banks. Besides the defaulters, the banks have also decided upon publishing the names and photographs of their guarantors, so as to discourage financial institutions and investment organizations from backing up dodgy borrowers, thereby striking the circuit of illicit loan giving and taking at the very root of corruption. To initiate recovery measures, this does look like an unusual method, however, it is obvious that the banks have been left with no other way but to implement this, particularly in the wake of falling value of the Indian rupee and the general climate of economic slump that the country finds itself in currently.

The banks are actually following up on an earlier Supreme Court order that specified that in case a borrower defaulted on paying back the dues within time, the guarantor would be criminally liable and responsible for clearing the debt. The banks also say that there is no minimum loan limit below which they cannot go to enforce the new name and shame rule, thereby eliminating any class bias or pro-corporate tilt within this new system. The very fact that the banks already reporting loan recovery, such as UCO and Allahabad banks, is a happy development. The government-owned banks, such as State Bank of India, are also equally enthusiastic about adopting this route, and a deadline of 15 days has been set for the borrowers to clear their dues in order to avoid being declared as loan defaulters. This should bring down the humungous debt burden on the banks, particularly the amounts stuck in deliberate defaults, which was as high as Rs 24,283 crore as on 30 June 2012, constituting almost 13 per cent of total NPAs.  

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