Mehul Choksi’s Gitanjali Gems among over 2,600 willful defaulters owe ₹1.96 lakh crore: RBI

The Reserve Bank of India (RBI) has flagged 2,664 companies as willfully defaulting, revealing a significant problem in the banking sector. These companies collectively failed to repay loans amounting to ₹1.96 lakh crore, despite the capacity to do so. This worrying trend raises concerns about the financial risks posed by large corporate borrowers to the banking system.

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Based on the data disclosed by the RBI for March 2024, the list of defaulters tops the list. Gitanjali Gems Ltd, which must ₹8,516 million. In response to an RTI filed by The Indian Express, the central bank provided a breakdown of the top 100 defaulters, excluding individuals and foreign entities. Second place is occupied by ABG Shipyard, which has an outstanding ₹4,684 million.

Top 10 failing companies

Gitanjali Gems Ltd: ₹8,516 billion

ABG SA shipyard: ₹4,684 billion

Cast steel and power: ₹3,557 billion

Infra Engineering Era: ₹3,507 billion

Diamonds and attractive jewelry: ₹3,356 billion

Transstroy (India): ₹3,261 billion

Global Rotomac: ₹2,894 billion

Zoom Developers: ₹2,217 billion

Unity Infra Projects: ₹1,987 billion

The number of willful defaulters has increased steadily over the past four years, from 2,154 in March 2020 to 2,664 in March 2024. The amount of unpaid contributions has increased from ₹1.52 lakh crore to ₹1.96 lakh crore during the same period.

As per RBI norms, a borrower is considered a willful defaulter if he fails to repay despite having the financial capacity to pay or if the funds are misused for purposes other than those specified in the loan contract. This includes siphoning off or diverting money from planned projects.

A striking case involves Gitanjali Gems, promoted by Mehul Choksi, who fled India after being implicated in the affair ₹14 trillion Punjab National Bank fraud. The investigation revealed that the company illegally withdrew assets used to secure loans without informing lenders. Choksi and his nephew Nirav Modi are also under investigation for several cases of fraud.

Another notable name on the list of defaulters is ABG Shipyard. The company’s management allegedly misused loans intended for the development of the shipyard and committed significant financial irregularities. Other companies in the top 10 include Winsome Diamonds, Transstroy India and Concast Steel & Power, with debts running into thousands of crores.

The RBI list also highlighted that Rotomac Global, which is to ₹2,894 crores, and Unity infrastructure projectswith a contribution of ₹1,987 crore were among those identified as willful defaulters.

Central bank data highlights significant gaps in lending and supervisory processes. Investigations into these borrowers are ongoing, involving agencies such as the Serious Fraud Investigation Office (SFIO) and the Enforcement Directorate (ED), particularly for cases of embezzlement or fraudulent practices.