Economic Survey: Wilful defaulters owe Rs 1.4 trillion to lenders

The Economic Survey, tabled in the parliament on Friday, has revealed that the wilful defaulters owe a whopping sum Rs 1.4 lakh crore.

As of 2018, wilful defaulters owed their respective lenders nearly Rs 1.4 lakh crore. The number has been steadily rising since the early part of the current decade, the survey has revealed.

"The defaulters are spread across several sectors, with manufacturing firms constituting the largest share. The RBI defines wilful defaulter as a firm that has defaulted in meeting its
repayment obligations even though it has the capacity to honour these obligations," the survey noted.

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A firm could also be branded a wilful defaulter if it uses the funds for purposes other than what is sanctioned by the lenders, siphons the money out to related parties or removes the assets used to secure the loan.

Every rupee lent to a wilful defaulter constitutes an erosion of wealth. Money lent to a genuine business creates assets, which generate profit and employment, the economic survey noted.

"On the other hand, money lent to a firm that has no intention of investing the proceeds in ex-ante profitable projects is money wasted," the survey alleged.

Thhe promoters at the helm of wilfully defaulting firms pledge, on average, almost 50% of their shareholding to lenders.

In contrast, the corresponding figures for distress defaulters and non-defaulters are 30% and 11% respectively.

In the past few months, the India Inc have seen a steep rise in the stake sales as pledges were invoked by the lenders, along with companies targeting deleveraging.

Many analysts on the street believe that this has been causing impediment in the credit growth in the country.