Lok Sabha Question No. 64 (STARRED), answered on 2018-12-14
Subject: Wilful Defaulters
Ministry: FINANCE
Asked by: RAM TAHAL CHOUDHARY, NARANBHAI KACHHADIA

## GOVERNMENT  OF INDIA

## MINISTRY OF  FINANCE DEPARTMENT  OF FINANCIAL SERVICES

## LOK SABHA STARRED QUESTION NO: † *64

TO BE ANSWERED  ON THE 14th DECEMBER,  2018/AGRAHAYANA 23, 1940 (SAKA) QUESTION

## WILFUL DEFAULTERS

## † *64: SHRI  RAM  TAHAL CHOUDHARY: SHRI  NARANBHAI  KACHHADIYA:

Will  the Minister  of FINANCE  be pleased to state:

- a) the reasons for not disclosing/making public  the names of wilful  defaulters  of banks by the Government;
- b) the  reasons  for  making   it  obligatory for  the  authorities   not  to  disclose/make public   the  names  of  wilful   defaulters   along   with   the  extent   to  which   the Government  stands to  benefit  from this;
- c) the reaction  of the Government  thereto  along  with  the corrective  steps taken  by the Government  in this regard;
- d) whether   the  Government   has  revamped   the  monitoring mechanism   regarding wilful   defaulters,   especially   such  defaulters   from Uttar   Pradesh   and  if  so,  the details  thereof;  and
- e) if  not,   the  reasons  therefor   along   with   the  details   about   the  IT  enabled interventions  to check  financial  frauds?

ANSWER FINANCE  MINISTER (SHRI ARUN  JAITLEY)

(a) to (e): A statement  is laid  on the Table  of the House.

***

STATEMENT AS REFERRED TO IN REPLY TO PARAs (A) TO (E) OF LOK SABHA  STARRED QUESTION NO. *64 FOR ANSWER ON 14 th   DECEMBER,  2018/  AGRAHAYANA 23  (SAKA)   BY  SHRI  RAM

## TAHAL  CHOUDHARY AND  SHRI  NARANBHAI   KACHHADIYA REGARDING  WILFUL DEFAULTERS

(a)  to  (e):  Reserve   Bank of  India  (RBI)  has  apprised   that   the  list   of  suit-filed defaulters   of  Rs.  1  crore   and  above  and  the  list   of  suit-filed   wilful   defaulters   of Rs.  25 lakh   and  above  are  available   in  public   domain   on  the  websites   of  Credit Information  Companies  (CICs).  RBI has also apprised  that  the list of non-suit  filed defaulters  of Rs. 1 crore  and above and non-suit  filed wilful  defaulters  of Rs. 25 lakh   and  above  is  confidential   in  nature   and  is  exempted   from disclosure   under section   45E  of  the  Reserve   Bank of  India  Act,   1934.  Further,   RBI, vide circular dated 27.6.2014,  has advised all banks  / financial  institutions to submit  the said list to all  CICs  directly  and not to RBI from December  2014 onwards.

RBI has further  apprised  that,  in a pending  case, it has submitted  to the Hon'ble Supreme  Court  a list of defaulters  above Rs. 500 crores in a sealed cover claiming that  the said information  is confidential  and requested  that  it may  not be revealed to the public.  The  matter  is under the  consideration  of the Supreme  Court.

RBI has  also  apprised   that   a  lending   institution can  consider   publication   of  the photographs  of only  those borrowers  who  have been declared  as wilful  defaulters following   the  mechanism   set  out  in  RBI  instructions, for  which   the  lending institutions  shall  formulate  a policy  with  the approval  of their  Board of Directors which   clearly   sets  out  the  criteria   based  on  which   the  decision   to  publish   the photographs  of a person  covered  in paragraph  above will  be taken  by  them  so that the approach  is neither  discriminatory nor inconsistent.

With   a  view   to  deter   wilful   defaulters   and  help   realise   repayment from them,   a number  of steps have been taken  by  the Government  and the banks.  As per RBI's instructions, wilful  defaulters  are not sanctioned  any  additional  facilities  by  banks or financial  institutions, their  unit  is debarred  from floating  new  ventures  for five years, and  lenders   may   initiate   criminal   proceedings   against   them,   wherever necessary.  As per data reported  by  Public  Sector  Banks  (PSBs), till  30.9.2018,  2,571 FIRs have been registered  against  wilful  defaulters,  9,363 suits have been filed for recovery   from them,   and  action   has  been  initiated   under the  Securitisation and Reconstruction  of Financial  Assets and Enforcement  of Security  Interest  Act,  2002 in  respect  of  7,616  cases  of  wilful   defaulters.   Further,   as  per  Securities   and Exchange  Board  of  India  (Substantial   Acquisition   of  Shares  and  Takeovers) Regulations,   2011,  wilful defaulters and  companies   with   wilful   defaulters as promoters/directors are debarred  from accessing capital  markets  to raise funds. In addition,  the Insolvency  and Bankruptcy Code,  2016 has been amended  to debar wilful  defaulters  from participating in the insolvency  resolution  process.

Fugitive Economic   Offenders   Act, 2018  has  been  enacted  to provide for attachment   of  property   of  a  fugitive   economic   offender,   confiscation   of  his property  and disentitle  him  from defending  any  civil  claim.  Government  has also advised PSBs to obtain  certified  copy  of the passport  of the promoters/directors and other  authorised  signatories  of companies  availing  loan  facilities  of more  than Rs.  50  crore.   Further,   for  enforcement   of  auditing   standards   and  ensuring   the quality   of  audits, Government   has  initiated   establishment   of  National   Financial Reporting  Authority as an independent  regulator.

As per inputs  received  from PSBs, for checking  financial  frauds,  banks  use various IT-enabled   interventions like   Fraud   Risk Management   Solution   for  prevention, detection   and  monitoring   of  fraudulent   transactions,   processing,   appraisal   and sanction of loans through Loan  Originating Software, Off-line Transaction Monitoring   System   for  internal   control,   generation   of  alerts   for  Early   Warning Signal and  raising red  flag, online verification of  credit   information   report, reporting  to and checking  data from RBI's Central  Fraud  Registry,  reference  to the wilful  defaulter  list,  etc.

RBI  Master   Circular   on  Wilful   Defaulters,   dated  1.7.2015,   addressed  to  banks, provides  that  legal  process wherever  warranted  against  the borrowers  / guarantors and foreclosure  for recovery  of dues should  be initiated  expeditiously and, further, that the lenders may  initiate criminal proceedings against wilful defaulters, wherever   necessary.   Government   has  also  asked  PSBs  to  examine   all  accounts exceeding  Rs. 50 crore,  if classified  as NPA,  from the angle  of possible  fraud  and in case an account  turns  NPA,  to seek a report  on the borrower  from the Central Economic  Intelligence  Bureau,  a nodal  agency  for economic  intelligence  mandated to  ensure   interaction and  coordination   among   all  the  concerned   agencies   in  the area of economic  offences.