Asik SyedIndia’s corporate financial landscape is witnessing a troubling surge in wilful defaults. As per the Reserve Bank of India (RBI), 2,664 companies were classified as wilful defaulters by March 2024, owing an alarming ₹1.96 lakh crore to the banking sector. Compared to 2,154 such defaulters in March 2020, this marks a significant uptick and poses questions about the stability of India’s corporate credit culture.
What is a Wilful Default?
A wilful defaulter is a borrower who deliberately avoids repayment despite having the financial ability to pay. This may also include:
- Misuse or diversion of loan funds
- Failure to use the funds for the sanctioned purpose
- Disposing of assets pledged as loan security without informing the lender
The RBI has laid out clear norms for identifying such actions as wilful default.
Ripple Effects on the Banking Ecosystem
The surge in wilful defaults has a direct impact on the health of Indian banks. The rise in non-performing assets (NPAs) makes loan recovery difficult, weakens liquidity, and reduces the banks’ ability to extend credit to productive sectors of the economy. This cascading effect could dampen economic growth in the long run.
Legal Actions and Investigations Underway
Agencies like the Serious Fraud Investigation Office (SFIO) and the Enforcement Directorate (ED) have stepped in, conducting probes and making high-profile arrests related to corporate defaulters. Multiple cases are currently being heard at the National Company Law Tribunal (NCLT), many of which involve insolvency and bankruptcy proceedings.
Trends Point to Escalation
Between 2020 and 2024, wilful defaults rose by 23.6% in number, while the outstanding amount swelled by 28.4%. These statistics signal deeper issues in corporate governance, transparency, and financial discipline. It’s a red flag for regulators and financial institutions alike.
Strengthening the Fight Against Wilful Default
To curb this menace, experts and policymakers are calling for:
- Tighter regulatory oversight on loan usage
- Stricter penalties and faster legal resolution for defaulters
- Greater transparency in loan sanctioning processes
- Public awareness initiatives on ethical corporate behavior and governance
Neha Baruah
Pinki Borah
Asik Syed
Tazrin Jakaria