The State-run Bank of Maharashtra (BoM) has written off bad loans of over Rs11,204 crore of 42 big defaulters and Rs2,548.13 crore of small borrowers since FY13-14. However, over the past nine years, the Bank could recover less than 15% of the amount from both big defaulters, who had defaulted on a loan of Rs100 crore and more, and small defaulters, whose outstanding was Rs1 crore and below.
According to information provided by BoM to social activist Vivek Velankar, who is also a shareholder, the Bank wrote off bad debt worth Rs11,204.10 crore during seven out of the past nine years in 42 accounts having loans of Rs100 crore and above while recovering just 11.65% or Rs1,305.81 crore. This information pertains only to loan accounts of Rs100 crore and above.
During the same period, Bank of Maharashtra wrote off bad loans of small defaulters worth Rs2,548.13 crore over the past eight out of nine years and managed to recover 14.41% or Rs367.31 crore. The Bank did not share the number of accounts for small borrowers whose bad loans were written off over the past nine years.
However, this year too, BoM declined to share the names of these big defaulters when the information was asked before its annual general meeting (AGM) scheduled on 28 June 2022. Last year too, the Bank had denied sharing list of names of big defaulters with Mr Velankar.
Chandrakant Bhagwat from BoM informed Mr Velankar, a shareholder of BoM, "...the information on list of loan takers names, whose loans above Rs100 crore are technically written off during each financial year since 2013-14 till 2021-22 and for each of this loan account, how much recovery was made till 31 March 2022 even though they were technically written off from books cannot be disclosed, as same being confidential in nature."
Interestingly, in 2020, SBI had shared the names of its big defaulters to its shareholder Mr Velankar, but last year, the Bank took a U-turn and refused to divulge these details.
Mr Velankar, who is also president of Pune-based Sajag Nagrik Manch, asks, "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 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 policymaker's aggressive posturing about their so-called recovery efforts.
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, both the finance ministry and the Reserve Bank of India (RBI) need to take strong action against banks indulging in such practices," he added.
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