Number of Wilful Defaulters Drops, But Challenges Remain, Says Finance Minister
New Delhi, February 4 (PTI) – As of March 2024, a total of 2,664 unique borrowers, excluding individuals and overseas entities, have been classified as wilful defaulters, the Rajya Sabha was informed on Tuesday.
Minister of State for Finance, Pankaj Chaudhary, shared this information in a written reply to a query, revealing that while the number of wilful defaulters has remained concerning, the rate of increase has slowed significantly. From an increase of 160 in the financial year (FY) 2021-22, the number rose by just 42 in FY 2023-24, marking a notable decline.
Chaudhary emphasized that various measures have been implemented by both the government and the Reserve Bank of India (RBI) to curb wilful defaults and reduce non-performing assets (NPAs). These steps have contributed to enhanced financial stability in the banking sector.
Consequences for Wilful Defaulters
The minister also highlighted stringent actions against wilful defaulters. Such borrowers are not eligible for additional credit facilities from banks or financial institutions. Moreover, businesses associated with wilful defaulters are barred from starting new ventures for five years. Further, these entities, including companies with wilful defaulters as promoters or directors, are prohibited from raising funds in capital markets.
Government's Measures to Improve Bank Health
Chaudhary also noted that the government’s broader strategy, which includes recognizing financial stress, resolving troubled accounts, recapitalizing banks, and enforcing banking reforms, has substantially improved the overall health of the banking system. As a result, the gross NPAs of commercial banks have significantly reduced. As of September 2024, the gross NPAs stood at Rs 4.64 lakh crore, representing a gross NPA ratio of 2.54%, down from a peak of Rs 10.36 lakh crore (11.18%) in March 2018.
Additionally, the slippage ratio—an indicator of new NPAs—fell to 1.35% in September 2024, compared to 7.12% in March 2018, further demonstrating the positive impact of these efforts.
Rise in Gold Loan NPAs
On a separate note, Chaudhary acknowledged a concerning uptick in gross NPAs related to gold loans. As of June 2024, the gross GNPAs for gold loans in commercial banks and upper and middle-layer non-banking financial companies (NBFCs) saw an increase of 18.14% compared to March 2024. Notably, gold loan NPAs in commercial banks alone surged by 21.03% in the same period.
While the decline in wilful defaulters is a positive trend, the rise in gold loan NPAs presents a challenge for the sector, which will likely require continued monitoring and intervention.
New Delhi, February 4 (PTI) – As of March 2024, a total of 2,664 unique borrowers, excluding individuals and overseas entities, have been classified as wilful defaulters, the Rajya Sabha was informed on Tuesday.
Minister of State for Finance, Pankaj Chaudhary, shared this information in a written reply to a query, revealing that while the number of wilful defaulters has remained concerning, the rate of increase has slowed significantly. From an increase of 160 in the financial year (FY) 2021-22, the number rose by just 42 in FY 2023-24, marking a notable decline.
Chaudhary emphasized that various measures have been implemented by both the government and the Reserve Bank of India (RBI) to curb wilful defaults and reduce non-performing assets (NPAs). These steps have contributed to enhanced financial stability in the banking sector.
Consequences for Wilful Defaulters
The minister also highlighted stringent actions against wilful defaulters. Such borrowers are not eligible for additional credit facilities from banks or financial institutions. Moreover, businesses associated with wilful defaulters are barred from starting new ventures for five years. Further, these entities, including companies with wilful defaulters as promoters or directors, are prohibited from raising funds in capital markets.
Government's Measures to Improve Bank Health
Chaudhary also noted that the government’s broader strategy, which includes recognizing financial stress, resolving troubled accounts, recapitalizing banks, and enforcing banking reforms, has substantially improved the overall health of the banking system. As a result, the gross NPAs of commercial banks have significantly reduced. As of September 2024, the gross NPAs stood at Rs 4.64 lakh crore, representing a gross NPA ratio of 2.54%, down from a peak of Rs 10.36 lakh crore (11.18%) in March 2018.
Additionally, the slippage ratio—an indicator of new NPAs—fell to 1.35% in September 2024, compared to 7.12% in March 2018, further demonstrating the positive impact of these efforts.
Rise in Gold Loan NPAs
On a separate note, Chaudhary acknowledged a concerning uptick in gross NPAs related to gold loans. As of June 2024, the gross GNPAs for gold loans in commercial banks and upper and middle-layer non-banking financial companies (NBFCs) saw an increase of 18.14% compared to March 2024. Notably, gold loan NPAs in commercial banks alone surged by 21.03% in the same period.
While the decline in wilful defaulters is a positive trend, the rise in gold loan NPAs presents a challenge for the sector, which will likely require continued monitoring and intervention.