Mumbai’s Kutchi-Visa-Oswal community staring at loan defaults of Rs 4,000cr: Report

Members of the Kutchi-Visa-Oswal community, one of Mumbai’s most influential business communities, is staring at defaults on non-collateral loans worth over Rs 4,000 crore, reports Mumbai Mirror.

On December 5, Sunil Gala of Navneet Group and prominent builder Deepak Bheda gathered at Dadar’s Kutchi Hall to discuss the crisis, the report said. The meet, attended by over a thousand community members, ended with the formation of Kutchi Sahayaru Abhiyan (Kutchis Support Mission) to find ways to resolve this crisis.

Despite defaulting, borrowers continue to live flashy lives. So, the community now plans to ostracise some of the bigger borrowers from community events, including weddings and temple trusts, the report said.

For decades, the close-knit Kutchi-Visa-Oswal community has a network of brokers who match people with money to those looking for capital for their businesses at 12-15 percent interest. In many cases, brokers charged as high as 25 to 30 percent per annum, trapping borrowers in a debt trap. As per the report, all that lenders have to show for the loan are vouchers signed by the brokers and borrowers. Brokers earn an annual brokerage of 1-2 percent of the sum borrowed.

Around 16-20 big defaulters each owe the community over Rs 200 crore, the paper reported. These include the owner of a food stores chain, a distributor of pulses, a top optician, a lottery operator and a papad manufacturer having a national presence. Brokers, who accepted money from lenders, too appear in this list as instead of offering loans they invested the same mostly in the real estate market.

In the past, whenever there was a crisis, elders stepped in to resolve the issue. But this time around, the magnitude of the crisis has spread panic through the community. Hard hit are brokers who accepted sums as small as Rs 25-50 lakh from lenders as their households run on interest income from these loans, the report stated.

The crisis have hit some of the smaller lenders so hard that they are struggling to meet their day-to-day expenses like medical bills and children school and college fees. This has prompted community elders to call on borrowers to settle their dues. Those, who have lost money, have been asked to provide details like the amount, broker’s name, and who the end borrower was, the report said.

Importer-exporter Harshad Contractor told the paper that the community is seeking legal opinion in the matter. However, a senior community member said legal recourse would be difficult as most of the lending was in cash.