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.
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