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UCO Bank has joined the growing list of lenders to have identified grounded Kingfisher Airlines as a wilful defaulter for non-payment of dues. However, the bank is yet to formally declare the company a wilful defaulter.
“We have identified Kingfisher Airlines and its corporate guarantors as wilful defaulters. We are in the process of sending them a notice,” a senior executive of the bank told Business Standard, requesting anonymity.
The state-run bank has lent over Rs 300 crore to Kingfisher Airlines. The airline has borrowed about Rs 6,500 crore from a consortium of 17 banks. According to the Reserve Bank of India (RBI)’s guidelines, a wilful default is an entity that has the capacity to repay its dues but chooses not to do so, or uses the borrowed money for purposes other than those for which a loan was availed of.
Typically, banks have an internal committee, which examines cases of wilful defaults. The credit monitoring or recovery departments submit their reports on borrowers deemed to have defaulted willfully to this committee. The panel examines the efforts made by the bank to recover the dues, the repayment capacity of the borrower, end use of the funds before identifying an individual as a wilful defaulter. Once a borrower is identified as a wilful defaulter, the bank sends him a notice with the reasons thereof. The borrower is generally given 15 days to make a representation against the decision to the grievance redressal committee of the bank.
A borrower is declared a wilful defaulter if he or she fails to offer a proper explanation or avoids the grievance redressal committee hearing repeatedly despite notices.
United Bank of India (UBI) was the first bank to declare Kingfisher Airlines and its chairman Vijay Mallya wilful defaulters for non-payment of loans. However, last month the company secured a stay from the Calcutta High Court against UBI's decision.
