PNB declares list of 904 wilful defaulters owing Rs 10,869 crore, stock falls

Government owned lender Punjab National Bank (PNB) has declared a list of 904 wilful defaulters owing almost Rs 11,000 crores to the lender as of December 2015.

PNB after posting a dismal set of Q3FY16 numbers where it saw its net profits dwindled by 93.41 per cent for the quarter in review to Rs 51 crore as bad loans mounted at an unprecedented pace. Bad loans went up sharply because PNB had to necessarily recognised the impairment and the resultant provisioning impact of asset re-classification, as per the Reserve Bank of India’s (RBI’s) assessment, in this quarter. Almost half the slippages in the third quarter were because of RBI’s asset quality review.

RBI has asked all the banks to declare their bad loans in accordance with the directives, given the timeline set by RBI to clean up banks’ balance sheet by FY2016-17.

Taking the cue from the central bank, PNB declared a list of defaulters owing money to the bank at the end of Q3. PNB added 140 companies to the list of wilful defaulters over the last quarter. At the end of September, 764 companies who owed the lender Rs 9,200 crore had been classified as wilful defaulters. The bank has dragged many wilful defaulters to legal forums like Debt Recovery Tribunal to get back money that is due to the lender.

Wilful defaulter is somebody that has defaulted on repayments to a lender even when it has the ability to meet its financial obligations. It also means when the borrower essentially does not used the fund for the purpose it has been borrowed or when he has not repaid when he can do so; when he has siphoned off the funds or when he disposed of the assets pledged for availing of loan without the bank's knowledge. Bank’s usually give defaulters a window for explanation before they are tagged as wilful defaulters.

Noticeable wilful defaulters to PNB are Winsome Diamonds and Jewellery, which owes Rs 900.37 crore, Forever Precious Jewellery and Diamonds (Rs 747.98 crore), Zoom Developers (Rs 410.18 crore), Nafed (Rs 224.26 crore) and S. Kumar Nationwide (Rs 146.82 crore). The bank recently declared Kingfisher Airlines and its guarantors UB Holdings and Vijay Mallya as wilful defaulters. Kingfisher Airlines owes PNB Rs 1500 crore.

It is widely expected that other banks will soon follow suit and declare their defaulters list. RBI has tightened the noose around willful defaulters in the recent months with governor giving statements on the same. Bankruptcy Bill is also in the parliament and is expected to get passed in the current budget session which will give more power to the banks in recovery of bad loans and prosecution of erstwhile promoters.

Reacting to the news PNB scrip was trading down by more than 2 per cent to hit a low of Rs 69.20 before recovering to trade flat.