Promoters of companies that default on repayment of loans will not get new loans for other companies that they run under the same umbrella even if these are in healthy financial state. Effectively this means if a company has defaulted, the promoter cannot seek loans for his other companies. The finance ministry is likely to come out soon with “formal” guidelines on the same. The issue has also been discussed with Reserve Bank of India governor Raghuram Rajan.
“It has been noticed that certain promoters have been adopting a unique strategy by setting up a special purpose vehicle and if that defaults they disassociate themselves from it while continuing with business with other companies. This has to stop and promoters who are wilful defaulters must feel the pinch,” Rajiv Takru, financial services secretary, told HT.
The level of bad debts in Indian banks have almost doubled since 2009 to 4.2% of total loans at the end of September, according to RBI data, which also highlighted that debt restructuring has increased significantly.
“We have already asked banks to recover more than what is written off and we are monitoring the situation,” Takru said, adding that most wilful defaulters are large borrowers.
The central bank has also directed banks to put in place effective mechanisms for early detection of loans turning unproductive, and called for banks to strengthen information sharing, and make it compulsory to receive and share information on borrowers before loans are approved.
Loans worth ` 75,000 crore were restructured in 2012-13 under the CDR scheme, almost double from 2011-12. The government has asked banks to closely monitor such accounts as there are chances of many turning unproductive due to the economic slowdown.