The Union Government has given details of the amount written-off and the amount recovered from the written-off accounts during the past 5 years with year-wise details quoting RBI reports.
|Financial year||Amount written-off (In crores Rs. )|
|Financial year||Amount recovered from written-off (In crores Rs. )|
The picture is clear. All along the Union Finance Minister has been giving various explanations with regard to the amount written-off by the Banks. She used to say that write-off does not mean that the entire amount will be a loss to the banks; the written-off amount will remain in the books of accounts and the banks would pursue their efforts to recover….But the reality is now crystal clear. Out of Rs.10,09,508 crores only Rs.1,32,036 crores could be recovered. That shows that only 13% could be recovered. Remaining 87% has been waived-off once and for all. The successive Financial Stability reports published by Reserve Bank of India clearly state that 90% of the Non-Performing Assets (NPAs) are created by the large borrowers. Hence it is open that the huge amount of public money amounting to Rs.8,77,472 crores has been doled out to corporates.
Why this scenario?
Why do the banks continuously write-off corporate loans? Obviously this is due to the policy of the Union Government. While more than 100% security is insisted for small loans except certain statutory loans in the field of agriculture, micro business, education, only 10% to 15% security is insisted for the corporate loans amounting to thousands of crores. The recovery mechanism through Civil Courts, Debt Recovery Tribunal, Lok Adalat, SARFAESI Act and the latest Insolvency and Bankruptcy Code (IBC) proved to be failure in recovering the Corporate Debts. In fact IBC has been an utter failure and the money recovered from the corporate NPAs is far less compared to the amount waived-off. There is absolutely no political will for the present Union Government to recover the corporate loans. In fact, banks are used as conduit to transfer public money to the corporates. Private Banks are no exception to this.
What is the consequence?
Because of this huge write-off, the honest borrowers are charged higher rate of interest and the interest on deposit is kept low. Further the Government is reducing welfare measures citing dearth of funds. The public distribution system, the health and education sector, the rural employment guarantee scheme etc. need higher allotment of funds. But since the Government is not getting the due dividends and taxes from the Public Sector Banks (PSBs) because of huge write-off, it is starved off funds. On the other hand, during this period about Rs.3,60,000 crores have been provided as capital to the PSBs. This could have been avoided had the corporate NPAs been fully recovered by suitably altering lending norms and by enacting stringent laws.
A public pressure has to be mounted to change the wrongful policy of the Union Government to prevent recurrence of this open plundering in the name of huge write-off to the corporates.