Amit Mitra, principal chief adviser to Bengal chief minister and the state finance department, on Thursday expressed concern about recovery prospects from wilful defaults in scheduled commercial banks in India, which have ballooned to Rs 87,295 crore for the top 50 defaulters as of March 31.

While citing the RBI’s draft master direction on treatment of wilful defaulters announced last week, Mitra said there is a need for more clarity on how the default amount will be recovered.

The RBI in its draft master direction on September 21 said that lenders will have to examine the wilful default aspect in all accounts with an outstanding amount of Rs 25 lakh and above and complete the process of declaring the borrower as a wilful defaulter within six months of the accounts being classified as a non-performing asset.

“Total wilful default by top 50 wilful defaulters in scheduled commercial banks was Rs 87,295 crore as of March 31. Total aggregate amount of wilful default is Rs 3.46 lakh crore up to December 2022. My question is, who will pay for the wilful defaulters? Some have run away and they will never pay. Will it be the middle class people whose deposits will be used for writing off loans with a small recovery?” Mitra said at banking colloquium organised by the CII.

“The new RBI circular allows wilful defaulters and companies involved in fraud to go for a compromise settlement and technical write-offs. What happens when you start negotiating? Who pays for the haircut? Latest RBI circular says that banks should declare wilful default within six months of NPA. It is a good notification. But the question is what happens after that,” he said.

The RBI master direction has broadly outlined certain measures that the banks can take against wilful defaulters. These include publishing photographs of wilful defaulters, debarment from institutional finance, ineligibility for restructuring, initiation of legal action among others.

Mitra also cited data disclosed by the government in Parliament in August, which showed that the write-offs have increase from Rs 1.75 lakh crore in 2021-22 to Rs 2.09 lakh crore in 2022-23. He said that there has been a write-off of Rs 14.56 lakh crores over last 9 years.

“Out of this Rs 14.56 lakh crore, how much has been recovered? Rs 2.04 lakh crores. That means Rs 12.5 lakh crores are hanging as write-offs which will never be recovered. If not recovered, who would pay for it? Will it come out of our deposits?” Mitra said.

“Government cant say we have nothing to do with this and this is all RBI,” the former finance minister of the state said.