When it comes to loan recovery from small borrowers, lenders use every resource available, including, but not limited to, publishing the debtors' names, to hustle them to repay. However, when the bad debt soars to Rs100 crore or more, the same lenders work hard to hide the names and other information of these big defaulters. State-run Bank of Maharashtra (BoM) not only refuses to share the names of big defaulters but also says information about recovery from such loan accounts is 'confidential'. Even after promising to do so during the annual general meeting (AGM), the Bank has not yet provided information on the haircut it suffered while recovering bad loans of big defaulters.
According to information provided by BoM to social activist Vivek Velankar, who is also a shareholder, the Bank wrote off bad debts worth Rs11,306.46 crore during eight out of the past 10 years in 43 accounts having bad loans of Rs100 crore and above, while recovering just 13% or Rs1,547.15 crore. This information pertains only to loan accounts of Rs100 crore and above.
"Further, this is to inform you that the information on the list of loan takers' names, whose loans above Rs100 crore are technically written off during each financial year from 2013-14 till 2022-23 and for each of this loan account, how much recovery was made till 31 March 2023 even though they were technically written off from books, cannot be disclosed, as same being confidential in nature," BoM told Mr Velankar.
During the AGM, Mr Velankar asked about the haircut taken by the Bank while recovering bad debts from big defaulters. AS Rajeev, the managing director and chief executive officer (MD&CEO), assured him that the Bank would provide the information. However, despite several follow-ups, he has not received any information from BoM on the haircut.
Interestingly, during FY22-23, the Bank wrote off a single borrower's bad debt of Rs107.18 crore without recovering any money during the entire fiscal year. For two fiscals, FY14-15 and FY15-16, BoM did not write off any bad loan of a big defaulter and there was also zero recovery in these two years.
The highest amount BoM wrote off over the past 10 years is Rs3,539.67 crore from FY19-20. In the same year, the Bank also recovered a maximum amount of Rs745.88 crore written off from the accounts of big defaulters with an outstanding of Rs100 crore and more.
Sharing a recent advertisement published by BoM to recover an outstanding of Rs73.48 lakh, Mr Velankar, who is also the president of the 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 policymakers' 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, 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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