Publishing names

Senior banking officials have argued that the position of non-performing assets (NPAs) of public sector banks will worsen if the names of corporate wilful defaulters are not published immediately. Since the bad loan crisis has caught the attention of a concerned public, both the Reserve Bank of India and the Centre have done little to bring in any stringent act or regulation to deal with wilful large corporate borrowers except for initiating legal proceedings against former liquor baron Vijay Mallya. "In the days to come, the position of NPAs will worsen if the names of wilful defaulters are not published immediately and treated as criminal offenders," All India Bank Officers Confederation's (AIBOC) West Bengal unit Secretary Sanjay Das. One must differentiate between willful defaulters and those cases of where companies are unable to pay back their loans temporarily on account of genuine reasons such as industry slowdown, delay in government policy clearances, and bureaucratic approvals. Last year, the Reserve Bank of India, in a sealed envelope, submitted a list of big loan defaulters (companies with over Rs 500 crore bad loans) in the Supreme Court. The Central bank acted on an apex court order. "RBI is supposed to uphold public interest and not the interest of individual banks. RBI is clearly not in any fiduciary relationship with any bank. RBI has no legal duty to maximise the benefit of any public sector or private sector bank, and thus there is no relationship of 'trust' between them. RBI has a statutory duty to uphold the interest of the public at large, the depositors, the country's economy and the banking sector," said the court. The argument often posed by those who want the banks to go public with the names is that it will ensure greater transparency in a sector that is reeling under the weight of bad loans. But there are those who believe that merely naming and shaming them isn't enough.

Such methods may work for loans given to individuals or smaller establishments. But it may not work for high-profile corporate borrowers because many of them are too shameless to care. Even after he was declared a willful defaulter, liquor baron Vijay Mallya continued to flaunt his wealth. In any case, the names of willful defaulters are in the public domain because the banks have filed suits against them. The best way to address the problem of willful defaulters is to strengthen the legal system, which could ensure faster resolution.