Union Finance Ministry revealed that India’s public sector banks (PSBs) have identified 1,629 corporate borrowers as wilful defaulters, with outstanding loans totaling ₹1.62 trillion as of March 31, 2025. This data, shared by Minister of State for Finance Pankaj Chaudhary in a written reply to the Rajya Sabha, is drawn from the Central Repository of Information on Large Credits (CRILC). The disclosure highlights the persistent challenge of wilful defaults in India’s banking sector, where borrowers with the capacity to repay deliberately fail to do so. Amid significant loan write-offs totaling ₹12.08 trillion over the past decade, the government has implemented stringent measures to curb defaults and recover dues. This article examines the scale of wilful defaults, the government’s response, the economic and social implications, and the path forward for India’s financial system.
Understanding Wilful Defaults
A wilful defaulter, as defined by the Reserve Bank of India (RBI), is a borrower who intentionally avoids repaying loans despite having the financial capacity, diverts funds for unauthorized purposes, or disposes of secured assets without permission. Such actions undermine the banking system’s stability and burden taxpayers. The 1,629 wilful defaulters identified by PSBs owe ₹1,62,961 crore, reflecting a systemic issue. While specific names for 2025 were not disclosed, historical data from 2023 indicates that the top 50 defaulters, including companies like Gitanjali Gems (₹8,738 crore), Era Infra Engineering (₹5,750 crore), and ABG Shipyard (₹4,774 crore), accounted for ₹87,295 crore, suggesting that a few large borrowers contribute significantly to the total.
Scale of the Problem
The ₹1.62 trillion owed by 1,629 defaulters as of March 2025 is a slight decrease from June 2023, when 2,623 borrowers owed ₹1.96 trillion. However, the issue remains critical:
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Concentration: In 2023, the top 50 defaulters alone owed ₹87,295 crore, with the top 10 accounting for ₹40,825 crore, indicating that a small number of large defaulters drive the bulk of the dues.
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Geographic Trends: Maharashtra, Delhi, West Bengal, Gujarat, and Tamil Nadu account for over 70% of wilful default amounts, highlighting regional concentrations.
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Historical Context: The number of defaulters has fluctuated, with 7,035 owing ₹59,000 crore in 2015 and 9,063 owing ₹1.10 trillion in 2017, reflecting a persistent challenge.
Over the past decade (FY 2015–16 to FY 2024–25), PSBs have written off ₹12.08 trillion in bad loans, with ₹2.9 trillion in the last five years alone. Write-offs, per RBI guidelines, involve removing non-performing assets (NPAs) from balance sheets after full provisioning, but recovery efforts continue through legal channels like civil courts, Debt Recovery Tribunals (DRTs), the SARFAESI Act, and the Insolvency and Bankruptcy Code (IBC). Despite these efforts, only ₹4.8 trillion has been recovered over five years, including ₹1.03 trillion from written-off loans, underscoring low recovery rates.
Government and RBI Measures
The government and RBI have implemented robust measures to address wilful defaults:
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Public Disclosure: Banks are mandated to submit monthly lists of wilful defaulters (loans ≥ ₹25 lakh) to credit information companies (CICs) like CIBIL, Experian, Equifax, and CRIF High Mark, with names publicly accessible to deter further defaults.
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Penalties: Wilful defaulters face a five-year ban on starting new ventures and accessing capital markets. A one-year bar on new credit facilities applies even after removal from the defaulter list.
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Legal Action: Banks can initiate criminal proceedings, and the Fugitive Economic Offenders Act (FEOA) of 2018 targets defaulters who flee India. Nine individuals have been declared fugitive economic offenders, with assets worth ₹15,298 crore confiscated under the Prevention of Money Laundering Act (PMLA) and ₹750 crore under FEOA.
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Forensic Audits: Since 2018, PSBs conduct forensic audits for loans above ₹50 crore to detect fraud or wilful default, ensuring early identification.
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Name and Shame: In 2018, the government directed banks to publish photographs and details of defaulters in newspapers, enhancing public accountability.
The RBI’s proposed 2023 guidelines aim to declare wilful defaulters within six months of a loan becoming an NPA, streamlining the process through Identification and Review Committees.
Economic and Social Implications
The scale of wilful defaults has far-reaching consequences:
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Economic: The ₹1.62 trillion in dues strains PSBs, reducing their lending capacity and impacting economic growth. Write-offs, while accounting measures, burden taxpayers, as highlighted on X, where users like @bankaffairs called it “legalised loot.” Low recovery rates (₹25,806 crore returned in fraud cases) further erode public trust.
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Social: The issue fuels public outrage, with posts on X noting that taxpayers bear the cost of “defaulting fat cats.” High-profile cases like Mehul Choksi and Nirav Modi amplify perceptions of elite impunity.
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Banking Sector: Wilful defaults, constituting 22% of gross NPAs in 2015, continue to challenge PSBs’ financial health, despite reforms like bank mergers and recapitalization.
Challenges
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Low Recovery Rates: Only ₹4.8 trillion recovered from ₹12.08 trillion written off over a decade highlights inefficiencies in legal and recovery mechanisms.
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Fugitive Offenders: High-profile defaulters fleeing India complicate recovery, requiring international coordination.
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Governance Gaps: Weak oversight and collusion, as seen in cases like the Punjab National Bank scam, enable defaults.
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Public Perception: The perception that banks prioritize write-offs over recovery fuels distrust, as voiced on X.
Path Forward
To address wilful defaults and strengthen the banking sector:
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Enhance Recovery: Strengthen DRTs and IBC processes to boost recovery rates, ensuring faster resolution of NPAs.
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Tighten Oversight: Expand forensic audits and real-time CRILC monitoring to detect defaults early.
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Global Coordination: Strengthen enforcement of FEOA to recover assets from fugitive defaulters.
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Public Transparency: Continue “name and shame” campaigns and public disclosures to deter potential defaulters.
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Policy Reforms: Implement RBI’s 2023 proposal for faster defaulter identification and stricter penalties to prevent recurrence.
Conclusion
The identification of 1,629 wilful defaulters owing ₹1.62 trillion by India’s PSBs underscores a critical challenge to the nation’s financial system. The Finance Ministry’s disclosure, coupled with stringent measures like public disclosure, legal action, and asset confiscation, reflects a commitment to accountability. However, low recovery rates and public frustration highlight the need for more effective mechanisms. By enhancing oversight, accelerating recoveries, and fostering transparency, India can mitigate the impact of wilful defaults, restore trust in its banking sector, and safeguard economic stability.
