Make willful default a criminal offence, otherwise Mallyas will continue to escape

The Central Bureau of Investigation and the Enforcement Directorate have finally come to the conclusion that the 'king of good times', Vijay Mallya diverted most of the Rs 6,000 crore loan that he took from a consortium of banks, led by State Bank of India.

A report in Economic Times, said that the money was diverted through shell companies in seven countries, including the US, the UK, Ireland and France.

Is this a revelation? Will this help the Indian banks in any way to recover their money from Mallya?

The truth remains that this is neither a revelation nor will it help the Indian banks to recover their loan amount which now stands at more than Rs 9,000 crore, which includes interest on the principal amount extended to Mallya's company.

Mallya was given enough time to abscond to the UK and is now comfortably watching and reading the coverage on the dire situation that the Indian banking sector is in.

It was in mid-2014 that the Kolkata-based United Bank of India first declared Mallya a willful defaulter. As per RBI's definition, willful default is one where a company's promoters have defaulted on the loan servicing obligation to the lender despite having the ability to honour their commitment. Ideally, the moment one falls in the category of willful default, it should be recognised that the company is not serious about running its business and wants to dupe the bank by diverting its resources to other avenues. An investigation must begin immediately.

But all that categorising of willful default leads to is depriving the defaulter of funds in the future. The banks have to fight a long legal battle to recover their loans, which in most of the cases does not happen. And in cases like Mallya's, the promoters escape the country.

The Indian banking system has always been lenient with industrialists whereas retail customers from the middle class have had to bear the cost of the former’s extravagance. Ideally, it should be the other way around but industrialists get away with their crimes because of their proximity with politicians and the belief that if the government tightens the noose around big businesses, it will affect the economy and the job market.

This belief must change, especially at a time when the industry despite getting a long rope, has failed to repay its loans, increase investments and create jobs.

According to media reports, there are over 5,000 willful defaulters declared by banks. The list is in the public domain- thanks to investigative journalism. But the government has not come clean on those names officially. It is important that the government stops shielding the defaulters in the name of safeguarding interests of the employees working in those companies.

Moreover, willful default must come in the category of a criminal offence and the promoters of such companies must not be allowed to leave the country without the permission of the courts. Until that happens, the findings of the ED and CBI will mean nothing. The Mallyas will continue to make merry- the politicians will also get their cut-while the country bears its cost.