Maintaining the 'tradition' of public sector banks (PSBs) of keeping hidden the names of big and wilful defaulters, the Central Bank of India (CBI) says information about defaulter-borrowers whose loans worth Rs100 crore and above are written off, is related to third party and, hence, cannot be provided. Since FY16-17, the Bank wrote off bad debts worth Rs21,085 crore of these big defaulters while recovering just 10% or Rs2,031 crore. Interestingly, speaking about haircuts it suffered while recovering bad loans of big defaulters, CBI simply says the query is unclear and, hence, cannot be replied to!
According to information received by social activist Vivek Velankar, the Bank refused to share the names of wilful defaulters but says it wrote off bad debts worth Rs4,805 of big defaulters (with outstanding of Rs100 crore and more) and recovered just 8% or about Rs400 crore.
Information obtained by Mr Velankar under the Right to Information (RTI) Act, shows that except for FY22-23, Central Bank of India did not write off bad loans of small borrowers (Rs1 crore and less). From FY16-17 till FY22-23, the Bank wrote off bad debts worth Rs1,856.87 crore of small borrowers and recovered nearly 21% or Rs388.35 crore.
Interestingly, Reserve Bank of India (RBI) has a central repository of information on large credits (CRILC) database system where all scheduled commercial banks and all Indian financial institutions are mandated to report their exposure of Rs5 crore and above which is used for monitoring purposes. Banks are also required to submit a fraud monitoring report (FMR) to RBI periodically. As mandated by RBI, banks do share information about all borrowers and credit defaults to credit information companies (CICs).
Mr Velankar, who is also the president of the Pune-based Sajag Nagrik Manch, says, "When these banks are sharing information on wilful defaulters with CRILC, RBI and CIC, why are they denying it under the Right to Information (RTI) Act? That too when money in these banks belongs to common people, who have a right to know how banks use their funds."
The Insolvency and Bankruptcy Code (IBC) was touted as game-changing legislation by a strong government to staunch the haemorrhaging of bank loans. The bankruptcy law now allows the same secured lenders to close these loans with massive write-offs or haircuts. However, the cumulative recovery of bad loans through the IBC since 2016 has been just 30.8%. More than 90% of bad loans originate in PSBs, and many are designed to go bad or become non-performing assets (NPAs).
In his RTI application, Mr Velankar also asked about the haircut taken by Central Bank of India to settle bad loans since FY17-18. However, S Mohan Babu, deputy general manager for recovery at CBI, brushed off the query with a single-line reply, "Query is not clear, hence cannot be replied."
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 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 government's and policymakers' aggressive posturing about their so-called recovery efforts.
During the past five financial years, scheduled commercial banks (SCBs) wrote off bad debts worth Rs10.09 lakh crore. As per data provided by RBI, PSBs have recovered Rs4.80 lakh crore, including the recovery of Rs1.03 lakh crore from written-off loans during the same period, the Lok Sabha was informed in December last year.
In a written reply, Dr Bhagwat Karad, minister of state for finance, says, "In the last five financial years, the PSBs have made an aggregate recovery of Rs4,80,111 crore from NPA accounts and upgradation of NPAs of Rs1,45,356 crore. Further, slippages into NPAs have reduced from Rs3,38,710 crore for FY16-17 to Rs1,44,315 crore for FY21-22, all of which has resulted in decline of NPAs."
"The decline in NPAs can also be due to write-off, which is primarily an exercise undertaken for cleaning of balance-sheet, avail of tax benefit and optimise capital by PSBs, as per RBI guidelines and banks' board approved policies," he added.
According to Mr Velankar, the writing off of bad loans shows that banks are reluctant to follow the 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, the finance ministry and RBI need to take strong action against banks indulging in such practices," he added.
Every yr crores of money is looted & the defaulters either escape or is never behind bars & the tax payers is forced to pay from their own pockets of all the looted monies!
The mother Fu6kers in BJP and RSS have now created a “bad bank” or assets reconstruction Co’s where all the unpaid loans will be transferred which will improve the balance sheet of all the banks and erase the bad loans forever!
Amid all this loot of banks let us pray to Lord Ram
Since all these money is tax payers money which poor depositors would have kept.Govt finance ministry and RBI are not strong enough to enforce these type of actionsSince all are party to it