RBI to Audit Defaults Above 1,000 Crore

UNDER SCANNER Companies taking advantage of the economic slowdown to avoid repaying loans, say banks

Companies that default in repaying large-ticket loans are set to come under the scrutiny of the Reserve Bank of India.

The central bank is likely to undertake forensic audit of firms that default in repayment of loans of over ` 1,000 crore. The decision to conduct forensic audits was taken by RBI governor Raghuram Rajan during a recent meeting, sources said, adding, the idea was to get a complete picture of the situation.

“While defaults have risen due to an economic slowdown, it is understood that several companies are taking advantage of this fact and are not repaying the debt, this needs to be checked,” a chairman and managing director of a large public sector bank who did not wish to be identified told HT.

A forensic audit is an examination of financial information of a firm or individual for the use of the same for evidence in court. Such audits are usually conducted to prosecute a party for fraud or embezzlement of financial claims.

The level of non-performing asset (NPA) in the Indian banking system has been witnessing a steady rise in the last couple of years. Banks have written off ` 1 lakh crore in advances since 2000, in a cause of concern for policymakers . The central bank had said earlier that over 90% have been written off for large business houses. The finance ministry, meanwhile, has already directed banks not to write off more than they can recover.

In 2012-13, banks restructured over ` 75,000 crore in loans under the corporate debt restructuring (CDR) scheme, nearly double the level in the previous fiscal. Banks have also been asked to monitor the top 30 NPA accounts.

Big companies including Kingfisher Airlines (KFA) and Deccan Chronicle have defaulted in loan repayment.

Hindustan Times, New Delhi, 19-04-2014