SBI Took 63% Haircut While Settling Bad Loans Worth Rs1.19 Lakh Crore in Past 7 Years
During the past five financial years, public sector banks (PSBs) have made an aggregate recovery of Rs4,80,111 crore from the non-performing asset (NPA) accounts and upgradation of NPAs of Rs1,45,356 crore. However, most PSBs refuse to share the names of big defaulters whose loans were settled through the national company law tribunal (NCLT), where these lenders have to accept a haircut on the outstanding. 
 
While maintaining its new tradition of hiding the names of big defaulters, State Bank of India (SBI) accepted it took a haircut of about 63% or Rs74,886 crore while settling loans worth Rs1,18,677 crore through NCLT. 
 
Replying to a query filed by Pune-based activist Vivek Velankar, under the Right to Information (RTI) Act, the central public information officer (CPIO) of SBI says, "The information sought relating to the details of loan takers whose loans were settled through NCLT or similar forum by accepting haircut relates to personal information of third party held by the Bank in fiduciary capacity and in commercial confidence and exempted from disclosure under Sections 8(1)(d), 8(1)(e) and 8(1)(j) of the RTI Act."
 
 
During the past seven years, SBI wrote off bad debts of big defaulters (Rs100 crore or more) worth Rs1.38 lakh crore while recovering just 11% or Rs15,818 crore. Between financial year (FY)2016-17 to FY22-23, SBI wrote off bad debts worth Rs42,545 crore of wilful defaulters and recovered just 13% or Rs5,723 crore, the reply received under RTI shows. 
 
 
At the same time, SBI continues to refuse to share information on the names of these wilful defaulters. In the reply, Srinivasa Rao Mulukutla, CPIO and deputy general manager (DGM) of SBI, says, "...the information sought relating to the name of individual account holders, details of write-off in their accounts and recovery in respect of each loan account relates to personal information of third party held by the Bank in a fiduciary capacity and in commercial confidence and exempted from disclosure under Sections 8(1)(d), 8(1)(e) and 8(1)(j) of the RTI Act."
 
The stubborn refusal to share information by SBI and other public sector banks (PSBs) is surprising since they have no problem with confidentiality when it comes to small borrowers. All lenders regularly publish recovery advertisements in the newspapers with personal details and photos of smaller borrowers who have defaulted. The stubborn protection of big borrowers or large defaulters under various pretexts is baffling. 
 
An aggrieved Mr Velankar, who is also president of the Sajag Nagrik Manch, asks, "When a common borrower defaults, the same banks publish his name and all details through advertisements in newspapers. Then, why do they want to keep the names of big defaulters hidden under the privacy clause? Why doesn't the 'privacy' clause apply while publicising names of common borrowers?"
 
Earlier in February, the Union government informed the Lok Sabha that all scheduled commercial banks (SCBs) wrote off Rs10.09 lakh crore from FY17-18 to FY21-22. At the same time, the Union government infused Rs2.76 lakh crore to recapitalise PSBs.
 
In a written reply, Dr Bhagwat Karad, minister of state for finance, says, "As banks write-off only those NPAs, which have been fully provided for, and continue their efforts to recover the dues, write-off exercise does not amount to misappropriation of funds." 
 
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, Mr Velankar says, adding, "Banks are more interested in writing off loans of these big defaulters to show a smaller amount under non-performing assets (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 Union finance ministry and the Reserve Bank of India (RBI) need to take strong action against banks indulging in such practices," he says.
 
Earlier this month, in a statement, People's Commission on Public Sector and Public Services (People's Commission) says the total number of suits filed by banks as of 31 March 2023 for parties who have defaulted on loans of Rs1 crore and above is 26,086. Their total outstanding is Rs601,834 crore. PSBs filed 16,420 suits for loans amounting to Rs410,758 crore. Private banks filed 8,194 suits against parties who had defaulted on loans of Rs1 crore and more.
 
"When it comes to bank frauds, here again, the track record of the last few years is abysmal and alarming. They rose nearly 17-fold from Rs34,993 crore in the 2005-14 period to Rs5.89 lakh crore in the 2015-23 period. That is nearly a 17-fold increase," the People's Commission says.
 
Opposing RBI’s statement on allowing compromise settlement of loans with fraudsters and wilful defaulters, the People's Commission says fraud and wilful default are criminal offences. The body has urged RBI to withdraw its circular immediately as it can issue instructions only in the larger interest of the public or in the interest of the depositors, an objective explicitly stated in the banking regulation legislation.
 
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