State-run lender Bank of Maharashtra (BoM) has written off bad loans of over Rs3,002.85 crore in FY20-21 belonging to big defaulters, taking its total of written off loans to Rs10,405.43 crore over the past 10 years. The Bank could recover just 9.96% or Rs931.98 crore from these big defaulters who had defaulted on a loan of Rs100 crore and more.
According to information provided by BoM to social activist Vivek Velankar, who is also a shareholder, the Bank wrote off bad debt worth Rs10,405.43 crore during six out of the past 10 years, while recovering just Rs931.98 crore. This information pertains only to loan accounts of Rs100 crore and above.
(Source: Bank of Maharashtra)
Also, like State Bank of India (SBI), where Mr Velankar is a shareholder as well, BoM too declined to share names of these big defaulters when the information was asked before the annual general meeting (AGM). Interestingly, last year, SBI had shared names of its big defaulters to its shareholder Mr Velankar, but this year, the Bank took a U-turn and refused to divulge these details. (Read: SBI Takes a U-Turn. Turns Down Shareholder’s Demand To Reveal Names of Big Defaulters)
Chandrakant Bhagwat from BoM told Mr Velankar: "The information on the list of loan takers' names, whose loans are above Rs100 crore, are technically written off during each financial year since 2011-12 till 2020-21 and for each of this loan account, how much recovery was made till 31 March 2021 even though they were technically written off from books, cannot be disclosed, as same being confidential in nature."
An aggrieved Mr Velankar, who is also president of Pune-based Sajag Nagrik Manch, says, "If this information is confidential, then how is it that last year SBI disclosed the names of 225 big defaulters and Indian Overseas Bank (IOB) disclosed the names of the 66 big defaulters? Does the definition of confidentiality change from bank to bank?"
"When a common borrower defaults, the same bank publishes his name and all the details through advertisements in newspapers. Why then are the names of bigger defaulters protected? Why don’t the 'confidentiality' and 'fiduciary relation' clauses apply while publicising the names of the common borrowers?" he asks.
Mr Velankar has been running a vigorous campaign in Pune to unearth information from big nationalised banks on large loan write-offs, exceeding Rs100 crore each.
Bank of Maharashtra told him to search schedule 18 of the financial statements in the Bank’s annual reports to know the total amount of loans technically written off every year from financial year 2011-12 till 2020-21 and recovery made against these technically written off loan amounts every year from financial year 2011-12 till 2020-21.
After studying the annual reports for the past five years, Mr Velankar found that since FY16-17, BoM wrote off total bad loans worth Rs19,303 crore for all defaulters. "During FY20-21, the bank wrote off Rs4662 crore, in FY19-20 it was Rs5697 crore, FY18-19 Rs5127 crore, FY17-18 Rs2460 crore and in FY2016-17 it was Rs1357 crore. Bank of Maharashtra wrote off total Rs19303 crore over just past five years to show lower non-performing assets (NPAs)," he says.
Technically speaking, when debts are written-off, they are removed as assets from the balance sheet because the bank does not expect to recover payment. This practice is frowned upon by experts but is routinely followed by banks as part of their tax management clean-up process. The beneficiaries are invariably some of our biggest industrialist defaulters.
In contrast, when a bad debt is written down, some of the bad debt value remains as an asset because the bank expects to recover it.
Such write-offs also debunk the aggressive posturing by the government and policy-makers about their so-called recovery efforts.
According to Mr Velankar, the writing off of bad loans shows that banks are reluctant to follow rules and laws passed by the Union government to recover loan amounts from big borrowers. In fact, he says, "banks are more interested in writing off loans of these big defaulters so as to show a smaller amount under NPAs and maybe there is a nexus among bankers and these defaulters resulting in banks not showing much interest in recovering written-off debt."
"Also, since these written-off loans are not part of the balance sheet, nobody even looks at them. Since this method of writing off loans is being rampantly used by banks, both the finance ministry and the Reserve Bank of India (RBI) need to take strong action against banks indulging in such practices," he added.
While the common borrowers are struggling with repaying equated monthly instalments (EMIs) of their loans and also face harassment for missing a single EMI, big and wilful defaulters seem to not only go scot-free but also 'live life king-size' without any worry or fear of any action due to the banks, especially the public sector banks (PSBs), turning a blind eye on these lapses.
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