During the past five financial years, banks wrote off bad loans worth Rs9.90 lakh crore but managed to recover just over 18% or Rs1.85 lakh crore. Yet, public sector banks (PSBs), which fall under the Right to Information (RTI) Act, 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 tradition of hiding the names of big defaulters, State Bank of India (SBI), the country's largest lender, accepted it took a haircut of about 65% or Rs84,037 crore while settling loans worth Rs1,30,105 crore through NCLT during the past seven years.
After being denied information under the RTI Act, Pune-based activist Vivek Velankar, a shareholder of SBI, asked for the information before its annual general meeting (AGM). However, SBI denied providing a list of borrowers whose loans of Rs100 crore and above were written off by the Bank from FY16-17 to FY23-24. He also asked how much money was recovered by SBI from these written-off loans.
Mr Velankar, who is also president of Sajag Nagrik Manch, also asked SBI to provide a list of borrowers whose loans were settled through NCLT or similar forums by accepting a haircut for the past seven years.
However, SBI refused to provide the information to its shareholders. It says, “As per section 44 of the SBI Act 1955, the Bank is not permitted to disclose any information relating to the affairs of its customers. Therefore, the borrower's name, account number and total amount cannot be shared.”
During the past eight years, SBI has written off bad debts worth Rs1,44,535 crore of defaulters with an outstanding amount of Rs100 crore and above. However, it managed to recover just 12% or Rs17,584 crore from the written-off amount.
The Insolvency and Bankruptcy Code (IBC) was touted as a 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).
SBI told Mr Velankar that since FY17-18, bad debt worth Rs1,30,105 crore was settled through NCLT in 244 cases. In all these cases, SBI took a haircut of 65% or Rs84,037 crore.
Surprisingly, in 2020, SBI had shared the list of names of big defaulters to Mr Velankar. However, after that, it continues refusing to provide the information to its shareholders. At that time, SBI had shared names of big defaulters, Alok Industries Ltd, Bhushan Power & Steel Ltd, IRVCL Ltd and Videocon Industries Ltd. (
Read: SBI Writes Off Rs1.23 Lakh Crore of Bad Debt, Recovers Paltry Rs8,969 Crore in 8 Years!)
Mr Velankar says, "In 2020, SBI had shared names of 225 big defaulters with me as a shareholder. However, after that, the Bank denied divulging the names of big defaulters. Does this mean that SBI's definition of confidentiality of defaulters keeps changing every year? And why keep hidden the names of big borrowers who defaulted, and since there is no hope of recovery, has the Bank technically written off the debts?"
"When a common borrower defaults, the same bank publishes his name and all the details through newspaper advertisements. Why do they want to keep the names of bigger defaulters hidden? Unfortunately, instead of taking stern action, the Union finance ministry and the Reserve Bank of India (RBI) remain in 'wait and watch' mode. Even there is hardly any action against the senior officials, including directors of the bank, who had sanctioned these huge loans, while knowing that it would turn NPAs sooner or later," he asks.
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.
Last week, the Union government informed the Rajya Sabha that during the past five years, banks have written off loans worth Rs9.90 lakh crore. In a written reply, Union minister of state for finance Pankaj Chaudhary said that during FY23-24, bank loan write-off was at Rs1.70 lakh crore, as against Rs2.08 lakh crore in the previous fiscal.
As per the guidelines issued by RBI and policy approved by banks' boards, NPAs, including those in respect of which full provisioning has been made on completion of four years, are removed from the balance sheet of the bank concerned by way of a write-off, the minister says.
