After Nirav Modi’s alleged bank fraud case, the government and banks are preparing the ground to take tough action against borrowers of loans who are capable of repaying, but have defaulted.

In this direction, over 16 Public Sector Banks (PSBs) and nine private banks have submitted a list consisting names of 645 defaulters to the Central Bureau of Investigation (CBI), Enforcement Directorate (ED) and the Directorate of Revenue Intelligence (DRI) for conducting an investigation, sources in the agencies confirmed. 

A source close to the ED told The Sunday Guardian: “As per information shared by 16 PSU banks and nine private banks to the Central agencies, a total of 645 debtors have taken loan amounts ranging from Rs 50 crore to Rs 100 crore; out of these, most of the debtors are involved in export-import business and have not repaid the loan amounts to the banks for many years.”

The move of the banks to submit a list of defaulters to the agencies came following directions from the Ministry of Finance. Finance Minister Arun Jaitley had instructed the banks to provide a list of non-performing assets (NPA) of over Rs 50 crore to the CBI, ED and other agencies investigating into the matter related to the bank fraud.

“After getting the NPA list from the bank, the ED has already started a formal investigation and soon it will send notices to all the debtors whose names are mentioned in the defaulters’ list. During an initial investigation, the ED has found that most of these debtors were involved in fraudulently diverting loan amounts for purposes other than what the loan was taken for,” the same source cited earlier said.

However, the banks had already submitted a similar list consisting names of the defaulters last year in February, but the agencies did not take any action in the matter. After the Nirav Modi case, the agencies have started acting tough on the defaulters.

According to sources, in September last year, even the Reserve Bank of India had told the banks to formulate a policy on publishing wilful defaulters’ photographs, without being discriminatory, but the banks did not come up with any such measure. 

A senior PSU bank official said: “Wilful defaults are the worst kind of bad loans that empower banks to go after promoters and directors by even naming and shaming them through public notices and advertisements for not paying up on loans that banks believe they have the ability to honour.”  

Defaults by Vijay Mallya, Nirav Modi and Mehul Choksi have raised questions over the functioning of PSU banks in the country. In order to prevent similar bank frauds, the Centre has approved the Fugitive Economic Offenders’ Bill, the purpose of which is to initiate criminal proceedings against those who flee from the country after committing an economic offense. The proposed law will make it easy to seize the properties of such people and the government will recover the debt after selling their assets. 

Also, there is a proposal to give greater powers to the investigating agencies.

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