Wilful defaulters of Indian banks: A first cut analysis

Abstract

This paper is a first-cut analysis of wilful defaulters’ quarterly data disclosed by the Credit Information of Bureau of India Limited (CIBIL) from June 2003 to March 2016. A substantial number of wilful defaulters are unlisted and private limited companies, financed largely by government-owned banks and concentrated in specific regions. We argue that borrowers turn into wilful defaulters by taking undue advantage of weak governance structures such as ineffective functioning of the economic, legal and political institutions of the country. Our empirical analysis supports the hypothesis that wilful loan defaults are largely caused by the weak country level governance factors.