Number of Willful Defaulters Rose Before Coronavirus Lockdown- Analysis

Business Standard Number of willful defaulters rose before coronavirus lockdown: Analysis

Nationwide lockdown to contain the pandemic may force more business to default on loans, say analysts

India’s number of willful defaulters — an entity or a person that has does not pay back a loan despite the ability to repay it —increased before the country was locked down for almost two months late March to contain the spread of the coronavirus pandemic, data shows.

Lenders filed 1,251 cases to recover Rs 24,765.5 crore, said an analysis of March quarter data by TransUnion Cibil, which maintains data on cases filed against willful defaulters. The numbers are released with a lag and not all lenders update with the same frequency. The analysis considered 15 lenders, which saw an increase in the number and value of outstanding willful defaulter loans. Defaulters above Rs one crore was considered for this analysis.

Experts said defaults might increase as the economic stress caused by the pandemic deepens. The lockdown caused all economic activity to come to a halt, affecting businesses and their ability to pay back loans to banks.

The lockdown meant that the National Company Law Tribunal’s (NCLT) hearings on businesses facing liquidation of assets were affected. This may well create a situation which emboldens defaulters, said Anand Tandon, an independent market analyst.

“There was some fear of NCLT, now you have put that in abeyance,” he said.

“It should be worse,” said a lawyer who has handled cases at NCLT and who was referring to numbers in financial quarters ahead.

Public sector banks accounted for around 82 per cent of the total increase in willful defaulter amounts.