Top Ten Termites: How ₹10,000 Crore in Wilful Defaults Ate Into the Foundations of IDBI Bank
An account of how ten corporate defaults—totalling nearly ₹10,750 crore—siphoned off an amount equal to IDBI Bank’s entire paid-up equity capital. Is Privatisation the Answer?
When Termites Feast, Foundations Crack
When public sector banks quietly absorb enormous corporate loan defaults, the losses are often brushed aside as mere accounting entries. But in the case of IDBI Bank, the figures demand a closer examination. Over ₹10,750 crore, owed by just ten corporate entities, has been classified as wilful default—an amount equivalent to the bank’s entire equity capital and nearly one-fifth of its net worth.
This is not simply a case of economic downturns or unfortunate lending. It points to a structural failure in financial governance: a bankruptcy framework that underdelivers, weak institutional enforcement, and a deeply skewed system of accountability between small borrowers and large defaulters.
The IBC: Reform in Principle, Retreat in Practice
The Insolvency and Bankruptcy Code (IBC), launched in 2016, was widely lauded as a landmark reform designed to expedite debt resolution and encourage responsible borrowing. Yet, as the IDBI experience shows, it has struggled to deliver on its promise.
In major cases involving IDBI’s biggest defaulters—ABG Shipyard, Amtek Auto, Dewan Housing Finance Corporation (DHFL), and others—resolution has been protracted, patchy, and painfully unproductive. Realisations have often amounted to less than 10 per cent of the original loan value, with liquidation attempts repeatedly failing to attract viable bids.
Instead of deterrence, the IBC is increasingly being seen as a tactical route to delay repayment and reduce liabilities under the guise of legal process. The law, while well-intentioned, has struggled to maintain its edge in the face of crafty litigation and poor enforcement.
From Development Institution to Debt-Laden Bank
Originally established in 1964 as the Industrial Development Bank of India, IDBI was created to serve as a development finance institution for the young republic—tasked with supporting large-scale industrialisation, infrastructure, and national institutions such as SIDBI, Exim Bank, and NSE.
However, a major shift came in 2004, when IDBI was converted into a commercial bank under the IDBI (Transfer of Undertaking and Repeal) Act. The bank, now exposed to retail and corporate lending markets, rapidly expanded its loan book. Over time, it accumulated significant exposure to high-risk corporate borrowers, many of whom eventually defaulted.
This mounting burden of bad loans led to IDBI being placed under the RBI’s Prompt Corrective Action (PCA) framework in 2017. The government and Life Insurance Corporation of India (LIC) subsequently infused capital to stabilise operations and restore solvency.
The Troubled Ten: Wilful Defaults That Matched the Bank’s Capital Base
Among the top wilful defaulters are:
ABG Shipyard – ₹2,057 crore
Amtek Auto – ₹1,806 crore
Bhushan Power & Steel – ₹1,640 crore
Punj Lloyd – ₹1,107 crore
DHFL – ₹962 crore
S Kumars Nationwide – ₹834 crore
EPC Constructions India – ₹803 crore
IVRCL – ₹598 crore
Ballarpur Industries – ₹493 crore
Gupta Coal India – ₹451 crore
Together, these firms account for ₹10,750 crore, nearly matching the bank’s equity capital of ₹10,752 crore, and amounting to about 20 per cent of its total net worth including reserves.
In several of these cases, investigations have been launched and promoters declared wilful defaulters—but the actual recoveries remain minimal. Meanwhile, many of the same promoters continue to operate elsewhere, or reside abroad, their liabilities lost in the fog of prolonged litigation.
Investigations Without Restitution: The Enforcement Gap
While several of the high-profile defaults linked to IDBI Bank have attracted the attention of investigative agencies such as the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED), the outcomes have largely been symbolic. In some cases—such as ABG Shipyard and DHFL—chargesheets have been filed, assets provisionally attached, and promoters arrested. Yet, despite these steps, actual financial recovery has remained negligible.
Legal action has not translated into restitution. Forensic audits, red corner notices, and public declarations of wilful default have created headlines, but yielded few concrete results. In the absence of enforceable international cooperation or effective asset repatriation, many of the individuals involved have relocated abroad, some reportedly acquiring foreign citizenships and global mobility privileges. This feeds a growing perception that the consequences of default are inequitably enforced—swift and punitive for the small borrower, yet largely cosmetic when it comes to high-value defaulters.
The Share Price Story: Reflecting Institutional Volatility
IDBI Bank’s equity shares, listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), have mirrored the bank’s turbulent journey.
In 2014, shares traded around ₹90, before the full extent of bad loans emerged.
By 2017, as the NPA crisis deepened and the bank entered PCA, the share price plummeted below ₹30.
Between 2021 and 2022, optimism about LIC’s intervention and improving performance pushed prices above ₹100.
In 2025, with privatisation on the horizon, the share trades at around ₹79–82, buoyed by market speculation but tempered by unresolved legacy issues.
While there has been a measure of recovery in recent years, much of the upside is linked to policy direction and potential ownership changes—not consistent operational strength.
Privatisation: Reform or Retreat?
The government, in collaboration with LIC, now plans to sell a 61 per cent stake in IDBI Bank to private investors. The strategic disinvestment, expected to conclude by mid-2025, has already passed the due diligence phase. Bidders include domestic banks and foreign institutions.
While privatisation is seen by some as a logical next step, several critical concerns remain:
Will legacy defaults be fully resolved before ownership changes hands?
Could privatisation shield past defaulters from accountability under a new governance regime?
Are public funds, which have supported the bank through its crisis, being discounted in a distress sale?
Trade unions and several policy analysts have voiced concern that privatising IDBI without addressing its default baggage amounts to institutional abdication. Selling the bank without first recovering lost capital may undermine not only IDBI’s legacy, but public confidence in banking reform altogether.
The Uneven Burden of Credit Discipline
Perhaps the most troubling aspect of this saga is the glaring double standard in enforcement.
Small borrowers—farmers, artisans, shopkeepers—often face swift, coercive recovery actions for defaults as low as ₹50,000. They are blacklisted, harassed, and frequently denied future credit. In contrast, large corporate defaulters—despite owing hundreds or even thousands of crores—are allowed to negotiate, restructure, and even rebrand their enterprises.
The Indian Banks’ Association (IBA) has so far failed to provide a coherent strategy to coordinate recovery or enforce meaningful penalties on large defaulters. This has further eroded public trust and reinforced the perception that financial discipline is enforced only on the powerless.
In Summary: A Moment for Reflection and Reform
When stories like these emerge, the already stressed middle classes and lower-income groups, especially small and marginal farmers, are compelled to ask uncomfortable but necessary questions. Why is it that draconian recovery measures, including arrest, attachment, and sale of land “as arrears of land revenue” under colonial-era laws, are so swiftly deployed against them—while black-tie borrowers who arrive at North Block or RBI headquarters in imported vehicles are treated with discretion, delay, and at times, deference?
Where is the equity the Directive Principles of State Policy envision—the promise of distributive justice and equal access to economic opportunity? How long can India afford a financial regime where credit discipline is aggressively enforced for the poor but gently negotiated for the powerful?
The ₹10,000 crore in defaults at IDBI Bank is not just a financial statistic—it is a symbol of systemic dysfunction, regulatory fatigue, and a worrying culture of leniency towards economic wrongdoing. If the government proceeds with privatisation without addressing the unresolved defaults and reinforcing recovery mechanisms, the same patterns may well repeat themselves—in other institutions, and with other taxpayers’ money.
What is required now is not merely a change in ownership, but a fundamental realignment of priorities: one that puts recovery, enforcement, and equity at the heart of banking reform. A system that fails to secure public money fails its public.
Otherwise, the termites will continue to eat away at India’s financial institutions—silently, persistently, and with near impunity.