Vijay Mallya's Kingfisher owes Rs2,673 crore is the largest defaulter of PSBs while Winsome Diamond and Jewellery Co with dues of Rs2,660 crore is the second biggest defaulter

Vijay Mallya-owned and now defunct Kingfisher Airlines is the biggest defaulter and owes Rs2,673 crore to public sector banks (PSBs), says All India Bank Employees' Association (AIBEA).

According to the bank employee association, Kingfisher tops the list of 50 biggest defaulters of PSBs that owes Rs40,528 crore. In order to highlight the increasing bad loans or non-performing assets (NPAs) menace in PSBs, the bank employees are observing 5th December as 'All India Demands Day' by wearing badges and holding rallies.

According to the union, Mumbai-based Winsome Diamond and Jewellery Company (erstwhile Su-Raj Diamond India Ltd), with dues of Rs2,660 crore, is the second highest defaulter, followed by Electrotherm India Ltd at Rs2,211 crore.

In May 2013, ratings agency CRISIL downgraded the Jatin R Mehta-led Winsome Diamond to a ‘D’ rating while placing it under watch in view of continuous defaults of the company’s overseas customers and consequent development of letters of credit (LoCs). At that time, Punjab National Bank, the lead bank of the consortium, has an exposure of more than Rs1,800 crore to the Winsome Group.

Some of the other big-ticket defaulters include, Zoom Developers Pvt Ltd (Rs1,810 crore), Sterling Biotech Ltd (Rs1,732 crore), S Kumars Nationwide Ltd (Rs1,692 crore), Surya Vinayak Industries Ltd (Rs1,446 crore), Corporate Ispat Alloys Ltd (Rs1,360 crore), Forever Precious Jewellery and Diamonds (Rs1,254 crore), Sterling Oil Resources Ltd (Rs1,197 crore) and Varun Industries Ltd (Rs1,129 crore).                                                                                                             

                                                                                                  (Rupees in crores)                                 

List released by General Secretary, AIBEA

                                   
In view of the rising bad loans in state-owned banks, the AIBEA said the government should set up a special investigation team to probe the decisions of their credit appraisal committees in cases where borrowers have turned wilful defaulters.

In addition, the bank employee association also wants responsibility fixed on banks’ top brass for the loans that have turned bad, allow banks to share information on NPAs and wilful defaulters under the Right to Information (RTI) Act, and declare wilful loan default as a criminal offence.

Pointing out that the credit appraisal committees of public sector banks had powers to sanction single loans up to Rs400 crore in the case of large banks and up to Rs250 crore in the case of small banks, Vishwas Utagi, General Secretary, Maharashtra State Bank Employees Federation, an affiliate of AIBEA, alleged that promoters of large defaulting companies diverted bank loans into real estate and floated cricket outfits for competing in domestic league matches.

According to the Union, over the past seven years, there are fresh bad loans worth Rs4.95 lakh crore only in PSBs, while during the same period, these lenders wrote off band debts worth Rs1.4 lakh crore. Top four defaulters of state-run banks constitute Rs23,000 crore of NPAs, the AIBEA said.

AIBEA has demanded remedial measures to address the growing menace of NPAs in state-run banks. The Union has demanded PSBs to publish list of bank loan defaulters of Rs1 crore and above, make wilful default in bank loan a criminal offence, order investigation to probe nexus and collusion (between the borrower and officials), amend Recovery Law to speed up the process, take stringent measures for recovering bad debts and not to incentivise corporate delinquency.

Last month, the Nitin J Sandesara-led Sterling Biotech, a Vadodara-based Gelatin maker, received approval from lenders to restructure its $250 million (about Rs1,575 crore) bonds. According to a report from Business Standard, Sterling Biotech’s bondholders of Zero Coupon Convertible Bonds which were due in 2012 had agreed to suspend all litigations in India and the United Kingdom, thereby opening a way for the consensual restructuring of the existing bonds.

Over the past year, Kingfisher, S Kumars Nationwide and Winsome Diamonds share prices have tumbled by over 60%. Following restructuring of bonds last month, Sterling Biotech shares rose 40% to Rs8.11 from Rs5.8 a year ago.

Kingfisher shares have fallen 63% to Rs4.92 as of 4 December 2013, from Rs13.25 as on 3 December 2012. During the same period, S Kumars and Winsome Diamonds shares fell 61% and 80% to Rs5.96 and Rs6.4, respectively.