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The Supreme Court has asked the Reserve Bank of India to disclose details of large corporate loan defaults. RBI has quite rightly replied that such a disclosure will not only be at odds with its fiduciary responsibility but also dent public confidence—an implicit recognition of the seriousness of the problem of loan defaults.
Policymakers are concerned that the ongoing debate on loan defaults could become a witch-hunt in which every defaulter is made out to be a criminal. The unintended consequence of such a witch-hunt could be a sharp slowdown in bank lending to even honest businessmen.
There should be a third player in this game. Business lobbies should throw their weight behind the current pursuit of wilful defaulters. Their silence will eventually harm the credibility of Indian capitalism. The chambers are vocal about every government failing. They should be equally open about corporate misdemeanours. The Vijay Mallya case is a good place to start.