RTI activist, Vivek 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. He covered 12 public sector banks (PSBs) in this mission and the results are staggering. Clearly, PSBs have little interest in the recovery of written off bad loans, especially from big defaulters, and are focused instead on merely keeping the account books clean and NPA-free, by writing off bad loans. An underhand nexus between the banks and the defaulters is a distinct possibility and merits investigation at the highest level. We have been publishing reports based on information shared by Mr Velankar regularly over the past five months and now present a summarised version of his findings.
Over the past eight years, 12 nationalised banks have written off a massive of Rs6.32 lakh crore of bad loans. Of these, as much as Rs2.78 lakh crore of the loans written off were to big defaulters with borrowings of Rs100 crore and above. While the government had aggressively claimed that loans written off are aggressively pursued and recovered, the recovery by these 12 banks from defulters is just 7% or only Rs19,207 crore.
In the past four years alone, these 12 PSBs wrote off bad loans amounting to Rs4.95 lakh crore but recovered Rs79,000 crore or 16%.
The 12 lenders include the State Bank of India (SBI), Bank of Baroda (BoB), Bank of Maharashtra (BoM), Union Bank of India (UBI), IDBI Bank, Punjab National Bank (PNB), Indian Overseas Bank (IOB), Central Bank of India, Canara Bank, UCO Bank, Indian Bank and Bank of India (BoI). Of these, IDBI Bank was re-categorised as a private sector lender in January 2019 after Life Insurance Corporation of India (LIC) increased its stake to 51% in the bank.
A few months ago, government advisers, economists and finance ministry officials had claimed on social media that technical write off does not mean waiving off loans and efforts are on for the recovery of these written off loans. Their tweets were amplified by paid digital armies to create the impression that worries over bad loans were baseless, and the bankruptcy law was the magic solution to recovery. The reality, as facts show, is vastly different.
Nobody bothered to provide concrete data to support the government’s argument. So, I decided to gather factual data from 12 nationalised banks about how much of the bad loans were written off over the past eight years and how much amount has been recovered by defaulters whose loans were written off. My findings are presented in the table below:
I also started gathering information on how much of the bad loans of big defaulters (bad loans above Rs100 crore) have been written off in the past eight years by each of these banks and how much amount is recovered from this write-off till date.
Being a shareholder of SBI, BoB and BoM entitled and enabled me to ask questions and obtain information during the annual general meeting (AGM) of these banks. My queries yielded information about bad loan write-offs and recovery from big defaulters for the past eight years for these three nationalised banks. For the remaining nine banks, I decided to file applications under the Right to Information (RTI) Act.
In response to my RTI applications, instead of providing the information, barring the Central Bank of India, UCO Bank and, to some extent, PNB, which gave data for four years only, all other banks directed me to extract information about the total loan write-off and recovery data from their annual reports published on their websites.
Accordingly, I studied the annual reports of 10 banks for the past eight years and the information I gathered was shocking. Over the past eight years, these 12 nationalised banks together have written off bad loans worth Rs6.32 lakh crore and recovered just Rs1.08 lakh crore, or 17%.
Of these, 10 banks (Canara Bank and BoI did not share any information) together have written off bad loans of big defaulters’ worth about Rs2.78 lakh crore and could recover only Rs19,207 crore or less than 7% till date.
Except SBI and IOB, all other PSBs refused to disclose names of these big defaulters, claiming it as confidential information and that disclosing it would be breach of privacy.
Here the million-dollar question is: If this information is confidential, then how is it that SBI disclosed the names of 225 big defaulters and IOB disclosed the names of the 66 big defaulters? Does the definition of confidentiality change from bank to bank?
Moreover, if a bank has practically lost hopes of recovery and has, hence, written off the loan, why should such a loan get the shield of secrecy?
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?
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.
All this clearly indicates that PSBs hardly have any interest in the recovery of written-off bad loans, especially from big defaulters. Banks are just interested in reducing the non-performing assets (NPAs) by writing off bad loans from their account books or may have some underhand dealing with these defaulters and thus are reluctant to recover bad debts.
This also shows that banks are reluctant to follow rules and laws passed by the Union government to recover loan amounts from big borrowers. In fact, banks are more interested in writing off loans of these big defaulters so as to show a smaller amount under NPAs. May be 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.
All this information proves beyond doubt that the claims made by banks and other experts that writing off bad loans is just book entry and recovery process continues, is sheer hogwash
In a written reply, minister of state for finance Dr Bhagwat Karad says, “As per Reserve Bank of India (RBI) data, PSBs reported 2,369 cases of frauds involving Rs3,204 crore in FY22. While FY18 witnessed fraud worth Rs28,884 crore, during FY20, there were 11,074 cases of frauds, which were highest in past five years. Over the past five years, there is a decline in number of fraud cases and the amount involved.”
