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Sunday, December 1, 2013

As Bad Loans Mount, India Gets Tough On "Wilful" Default

The last time I heard the word "willful" in the context of a discussion about the law, it was used to describe the state of mind of Bernard Madoff's investors....  The term sometimes used is willful blindness.

Reportedly India is suffering from willful behavior that is harmful as well... willful default.  The term refers to borrowers who are able but unwilling to repay loans, have diverted loan proceeds for purposes other than their stated use or overstated profits in order to obtain loans.

In the United States, creditors of willful defaulters can sue them or bankrupt them on an involuntary basis.  In India, people must work things out in a different way.

I welcome insights of people who do business in India... How does a lender collect in the event of willful default??

Per www.globalinsolvency.com:



Fri., November 29, 2013
The prevalence of so-called "wilful" defaults is symptomatic of what critics say is a loose credit culture that plagues Asia's third-biggest economy, keeping underperforming companies in business, crowding out other borrowers and leaving taxpayers on the hook to recapitalise state banks, The Economic Times reported. The Reserve Bank of India defines a wilful defaulter as a borrower that is able but unwilling to pay, has diverted loan proceeds for other than their initially stated use, or has overstated profits in order to obtain a loan. Policymakers have voiced growing about the problem in recent months, and are urging banks to get tough. "In India, there is no stigma attached to defaulting on bank loans," said Sharad Bhatia, president, stressed assets management, at Axis Bank, India's No.3 private sector lender, which has filed a lawsuit against Kemrock in the western city of Ahmedabad in an effort to seize assets. India has been alarmed by the rise in soured loans, especially at the state lenders that dominate the banking system, and wants to crack down on wilful defaults. Tackling the problem is difficult in a country that lacks a bankruptcy law and has notoriously clogged courts.

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