One don’t know for sure whether Adani is the biggest loan defaulter or not, but, indeed the Adani group owes big chunks of money to banks

If you talk about NPAs, (non-performing assets) or bad loans, which basically refer to money that is borrowed from a bank and not paid back on time, Vijay Mallya and Nirav Modi are only guppies. There are bigger fishes in the NPA pool that, ironically, don’t grab much attention as the guppies do. But, their names pop up once in a while and disappear in a bit. On Monday, BJP leader and member of Parliment Subramanian Swamy tweeted about Goutam Adani, apparently referring chairman of Adani group, saying Adani is “the biggest NPA trapeze artiste in PSUs is Gautam Adani. It is time he is made accountable or a PIL is inevitable.”

The biggest NPA trapeze artiste in PSUs is Gautam Adani. It is time he is made accountable or a PIL is inevitable — Subramanian Swamy (@Swamy39) March 6, 2018



One don’t know for sure whether Adani is the biggest loan defaulter or not. But, indeed the Adani group owes big chunks of money to banks. According to Bloomberg data, Adani Power has a total debt, as of September 2017, at Rs 47,609.43 crore. Adani Transmission has total debt, as of September 2017, at Rs 8356.07 crore, Adani Ent, as of September 2017, at Rs 22424.44 crore and Adani Ports with total debt, as of September 2017, at Rs 20791.15 crore. But Adani isn’t the only one. These may also include debt raised from other than banks.

According to data available with the Credit Information Bureau of India Ltd (CIBIL), Indian banks have reported wilful defaults of over Rs 111,738 crore involving 9,339 borrowers of which government banks have a share of Rs93,357 crore involving 7,564 borrowers as of September 2017 (as this Indian Express report explains). In June, 2017, Firstpost published the details of some of the large bank loan defaulters saying these firms may opt for bankruptcy after the new code came into effect.

To get an understanding it will be useful to revisit some of the names. These include Essar Steel (According to Bloomberg Essar steel debt as of March 2018 was at Rs 8173.05 crore on a standalone basis), Lanco Infratech (Lanco consolidated debt as of March 2017 was at Rs 43501.75 crore), Bhushan Steel (Bhushan Steel consolidated debt as of March 2018 was at Rs 46263.23 crore, primarily state-run lenders including State Bank of India (SBI) and Punjab National Bank).

There are several other names such as Monnet Ispat, Alok Industries, Era Infra engineering, ABG Shipyard, Jaypee Infratech, Amtek Auto and Jyoti structures. All these firms owe large amount of money to banks. Some of these may be in the process of paying back while some are looking options to declare bankruptcy.

The idea of listing these names is to just to make a point that while Mallyas and Modis hog the headlines and thereby put pressure on the system to act, the government and regulator shouldn’t lose focus on other bigger loan defaulters. At the moment the government and RBI are progressing in a promising manner. The bankruptcy code is in place, the RBI and government seem to have learned the lessons hard way and has initiated steps to clean up the banking system. But, that is normal typically in the aftermath of the break of a scam. Investigators and regulators tend to act on those specific cases vigorously for a while before the enthusiasm soon dies down.

Even then other larger cases that aren’t in news tend to be ignored till a problem arises. Vijay Mallya is a good example. The Vijay Mallya-Kingfisher episode became a hot topic when the liquor king flew out of the country in March, 2016---four years after his loans to banks worth Rs9000 crore became NPAs. In fact, Mallya’s escape and subsequent media focus on the case brought back the focus on NPAs in banking sector in a big way. The Nirav Modi-fraud and a series of other cases such as Rotomac and RP Infosystems have added fuel to the fire. But, it will be a mistake to see these cases in isolation and miss the larger picture.

Clearly, the RBI and the government acted too late to address the NPA crisis. The central bank came with a framework for the early identification of stressed assets in early 2015, which was followed up with actions from the government to give the contours for the bankruptcy code. The central bank, under Raghuram Rajan, read out the riot act to the banks asking them to declare all NPAs upfront and complete the process by March,217. The deadline wasn’t met but the process triggered one of the biggest NPA hunts in the history of Indian banks.

In terms of loan size, all these cases---from Mallya to Modi—are relatively small compared with a handful of other default cases. There needs to be a comprehensive plan to approach each of these cases. Even after the bankruptcy code in place, it is difficult to imagine how banks will be able to recover a substantial part of the money at stake because they need to either sell of the assets or force the defaulter promoter to pay back from his pocket.

As Mallya and now Nirav Modi episode have shown, this is easier said than done. It is not clear what suddenly provoked Swamy to take Gautam Adani’s name from the list of big defaulters. But, in a certain way, Swamy has highlighted an important aspect, suggesting that the government and regulator should not miss the forest for the trees.