The Securities and Exchange Board of India (SEBI) is currently in consultation with the Reserve Bank of India on regulations to prevent wilful defaulters from raising funds from the capital market. The SEBI Chairman U K Sinha has said that the board and central bank will soon finalise norms against wilful loan defaulters.
Indian banking industry witnessed a steep jump in defaults in the recent times mainly due to economic slowdown. However, there have been cases of wilful defaults by company promoters and banks have reported wilful loan defaulters' who fail to repay their debts inspite of ability. Currently, banking watchdog RBI has been mulling a ban on capital raising activities by such entities and devising ways of sharing real time information on such activities with the capital market regulator.
Bad loans in India were estimated to be close to Rs 2 lakh crore recently and public sector banking group was alone sitting on Rs 1.23 lakh crore of NPAs on March 2013. The RBI and the government are worried that this could drag down many banks. The top 50 defaulters in the country accounted for about Rs 40,500 crore of these NPAs. Increasing NPAs has become a major concern for banking industry forcing banks to set aside more capital against such bad loans.