Willful defaulters face ban on loans

TNN | Aug 18, 2012, 12.59AM IST

 The government is asking banks and financial institutions to prevent willful defaulters from floating new ventures for at least six years by choking the flow of funds, especially long-term capital. 

Even auditors of these companies, who are seen to be negligent, could face action with the finance ministry suggesting that lenders lodge complaints with the Institute of Chartered Accountants of India (ICAI), the regulator for the profession. 

The suggestions come at a time when there has been spurt in bad debt of banks with gross NPAsas a percentage of loans rising to 3.5% at the end of June 2012 from 2.6% a year ago. During this period, private sector players, both new and old generation banks, had witnessed a decline in the proportion of gross NPAs. 

Within the public sector fraternity, which accounts for around 70% of the total banking business, Bank of Maharashtra and Dena Bank witnessed a decline in NPAs, but at least five lenders — Central Bank of India, State Bank of Mysore, State Bank of India, Union Bank of India and IDBI Bank — saw an increase of at least one percentage point. For SBI, gross NPAs accounted for over 5% of the loans given by it. Apart from action against willful defaulters, the government has also suggested better monitoring and more stringent recovery.