12 Top Nationalised Banks Wrote Off Rs6.32 Lakh Crore in 8 Years; Recovered Just 7% of Write Off Debt from Big Defaulters
Vivek Velankar 30 November 2020
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:
12 PSBs written off debt for past 8 years, Bank loot, SBI
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.
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4 years ago
Unfortunately, lot of statistics, but hardly any analysis of the painstakingly compiled data. Here are some queries, that need to be answered:
(1) Write offs in the last 4 years were Rs.495190 crore, as against the 8 years’ number of Rs. 632377 crore. Thus around 78.3% of the write offs have taken place in the last four years. Why? What happened after 2016? Has Insolvency and Bankruptcy Code (IBC) introduced in 2016 anything to do with this trend? With introduction of this enactment, sale and disposal of NPA accounts even with discounts or ‘haircuts’ are expected to receive judicial approval and protection. Thus, Banks can become bold enough to recognize and acknowledge reality and accept realistic bids/offers without the fear of being hounded by CBI/ED/CVC. This is, in fact, a positive development. Accumulated NPAs are needed to be cleaned up and bank balance sheets must be cleansed periodically by recognizing the actual position regarding recovery prospects. It is far better to accept reality and write off accounts rather than to pretend that they are recoverable and doggedly keep these accounts in live books.
(2) The write off amounts appear huge in absolute terms, but they are to be compared with aggregate advances and investments of these banks. Where is the comparison? Depositors’ funds are deployed not only in advances but also in investments in securities, bonds, shares etc. Thus, total NPAs have to compared against all these assets. For example in case of SBI, total advances are 23.25 lakh crore and investments are Rs. 10.47 lakh crore; total Rs. 33.72 lakh crore. Against these, write offs are Rs.2.35 lakh crore, i.e. 7%- a significantly high percentage, but nothing that suggests a a meltdown or catastrophe. SBI’s profitability has improved. It’s Capital Adequacy Ratio stands at healthy 13.04% and Provision Coverage Ratio ( which includes base of written off accounts) at whopping 83.62%. Not a trace of a criminal aspect that the learned author would very much like to suggest.
(3) Is there no such things time-lag in bank recoveries? Are loans expected to be recovered immediately after they are referred to NCLT? In theory, yes. But in actual practice there is a huge pendency in NCLT courts. As many as 19800 cases are pending as on 31-07-2020. Besides, there is no legal clarity in the act and many of its provisions are being contested and subjected to judicial interpretation.
(4) Post-2016 era saw collapse many industrial groups, which were considered sound in the past. Bhushan Steel , Bhushan Power ( Singhals), Essar Steel (Ruias), Jet Airways ((Naresh Goyal), ADAG( Anil Ambani), Videocon ( Dhoots) are prominent examples. You can add many other names such Suzlon Energy, Jaycee Infratech, Ansal Housing, Aban Offshores, Bedmutha Industries, Hindustan Constructions, Bombay Rayon Fashion, Gitanjali Gems, IL&FS, Yes Bank, HDIL and many others. While some the above were undoubtedly fraudsters, are all of these cheaters and criminals? What happened, why did the Indian industry giants simply collapse? Rabid allegations of universal criminality in this phenomenon would amount to oversimplification and superficial analysis. An in-depth study is required.
(5) Is it right to say that simply because, written off accounts are not part of the balance sheet, nobody in public sector banks looks at them? Please note that accounts are written off after making 100% provisions there-against. Thus, a 100% hit has already been taken- profits are reduced or losses increase to that extent. Thereafter, every single rupee recovered in these accounts adds to the profits of the banks, due to write-back of provisions. Why would then banks not like to recover these loans, more particularly when all these banks have set up separate verticles/ departments/ groups headed by topmost functionaries and supported by adequate staff? The allegation that write offs amount to loots is based on a sadistic assumption that all the defaulters are let free without any consequences and/or recoveries are not being made even when there are assets to recover. This is simply not true. In case of Essar Steel banks could recover over 90% of Rs.42000 crore debt. Similarly, in case of Bhushan Steel, the Tatas paid Rs.35200 crore against dues of Rs.56000. Thus substantial recovery is possible where companies are engaged in manufacturing activities. However, in case of service industries, such as say Jet Airways, no assets would be available- planes are taken on lease- , what recovery would be possible? However, it doesn’t mean that owners/ promoters are not penalized in case of default. The moment a company is referred to National Company Law Tribunal (NCLT) and the reference is accepted all the ownership and management rights of the shareholders/board of directors cease to exist. Assets and management is transferred to the lenders. The existing promoters are not allowed to bid in any direct/indirect manner. In fact, some players in the industry feel that these provisions are too harsh and it can kill entrepreneurship in the Indian business community. However, I am of the view that these provisions must continue.
(6) Finally, what is the way out of this imbroglio? In my view commercial banks should not be pressurized or encouraged to give thousands of crores to risky big-ticket projects. Instead, these banks should focus on working capital funding and on retail segment and small loans. The government should develop alternative chanbels such as bond market to fund these projects. Well-informed investors who have risk-appetite can participate in funding such kind of projects. The inherent risk involved in project loans and medium and long term loans cannot be shared by unsuspecting depositors of commercial banks. Here is what IDBI Bank says in its Annual Report of 2020:” Building on its desired positioning as a retail-focused bank, your Bank continued to strategically scale up its Retail, Agri and MME asset book while simultaneously limiting its corporate exposure.” Bank of Maharashtra in its Annual Report of 2020 says, “ Your Bank made a strategic decision to rebalance its advances portfolio and accordingly Retail, Agriculture, MSME sector showed an improvement to 57.29% as on 31.03.2020 from 50.98% as on 31.03.2019. In the end, I must add that RBI must periodically monitory debt levels of large business groups. There are prudential norms for lending to an industrial group by an individual bank. But what about aggregate debt of the banking system as a whole to big business groups? Who will monitor that? There is a case of a well known group which wants grow at breakneck speed. It’s total debt exceeds Rs.1 lakh crore and its aggregate turnover and financials do not justify such huge lending. What will happen to the banking system, if this group fails and loans granted to them become NPA?
4 years ago
4 years ago
The author has dug deep into this can of worms to come out with such an in-depth report. Kudos!
A similar study on the NPA situation that existed prior to Bank Nationalisation can pull many skeletons out from the cupboard. The root cause of this appaling picture is the nexus between politicians, bank officials and Chartered accountants. Remember the Satyam episode and how a major accounting firm like PWH was privy to the shady deals. In my opinion chartered accountants collude with bank officials to create numbers that look good on paper. So, sad that there is no law to effectively bring these willful defaulter down on their knees. Instead, they are free to enjoy all good things in life including foreign mansions and foreign travel. The first step should be to confiscate all assets of such defaulters even if they are held in benami names. See how Vijay Mallya is enjoying his flamboyant life. Nirav Modi may be in jail, but his assets across the globe acquired out of siphoned off money remain safe.

Is it difficult to establish a trail of how such huge sums vanish into thin air? If senior bankers at the board level are held accountable, possibly with long jail terms for wrong doings, it could be possible to arrest the spread of this virus in the days to come.

On the other side of the fence, a common man owing a few lakhs is hounded and threatened perpetuallly.
4 years ago
Such non refundable loans are sactioned by respective Bank / branch with indirect involvement of Bank directors and even politcal leaders, since the practise is continuing for years without any action. Afterall the money belongs to general public who don't have any knowledge and suddenly banks are declared as insolvent by writing of deposits. e.g. PMC Bank, YES Bank , LVB etc
4 years ago
Did not write off but transferred from lower 60 % population to upper 1 %
Rupesh Chatterjee
4 years ago
I think this news should be taken positively.

Even after writing off close to 80 billion USD as bad debts over the past 8 years, the banking system in our country coutinues to exist without much turbulence.

Your deposits withdrawal request are still honoured on demand at your bank counter anytime.

Banking systems in other countries would have collapsed in similar situations.
4 years ago
Today there is a talk that banks owned by Corporate House would be worse performing than the PSU banks. It is difficult to say these days. A corporate bank will clean a depositor out with fine print details while a PSU bank will bleed itself regularly with NPAs. This is not to say that all Corporate Bankers will not do the banking business for profitable operations from their banks. The situation is similar to a Private Airline versus Air India.
4 years ago
In some cases write-off is resorted to after some recovery and OTS. In the latter category, there will not be any further recovery. The percentage of recovery may undergo slight change if data reg write-off after OTS is available.
4 years ago
Great Work , Shri Velankar. Taxpayers are now being kicked around by well-paid, careless bankers.
4 years ago
The recovery data may not be fully correct as from Essar Steel alone the bank would have recovered more than Rs 19000 crore.
4 years ago
Congratulations for bringing out information which Banks and RBI are relunctant to publish.
Being a retired Banker, I can say that it is not that the Banks do not follow rules of recovery. But there should be some security with value to realise. These are corporates who have looted the public money with the connivance of politician-bureacracy- banker nexus. Consortium loan is the name of the game. Big brother in banking makes assessment and sanction the limits and other chota brothers vie for each other for a share without doing any independent home work. Because Banks at the advise of consultants have started giving Credit Targets which is an uphill task. Easy way is to take a share in consortium. All these failed entities were the darlings of the market and the Govt. Because everyone benefited. But Dr. Raghuram Rajan's insistence on Asset Quality Review opened the can of worms and rest everything is now well known. But the beauty of the system is that a Branch Manager gives a loan is accountable for his action, but the Management Committee of the Board of Directors is immune from accountability. Unless the systemic changes are brought in to create accountability at all levels, the caanot be any improvement in NPAs of Banks.
But who will bell the cat?
4 years ago
What about the Private Banks & MIcroFinance, are the NPA's alarming ???
4 years ago
The beneficiaries of write offs details and their networth particulars need to be published and widely circulated so that the tax payers ,the depositors and all the stakeholders of the banks and the Government know how the banks get systematically looted by smart operators and enjoy their life. Granting loans to bad borrowers and writing them off after due process has become a very successful business model over the years and covering them up with high sounding words of remedial measures has been going on simultaneously fooling the depositors ,share holders and all the stakeholders of the economy. May God save the people and the economy. Ache din will continue to be elusive as long as businesses are not run ethically ,professionally and commercially .
4 years ago
Congratulations to the author. Banks concerned would also have found that legal recovery methods are proving costlier than writing off the loans. If the Banks disclose the costs of recovery, such data would give scope for system correction. Holding the longstanding loans in books of accounts, if proved costlier, banks would choose the safe option of negotiating OTS or increasing the write off. It is time for the government to examine the legal delays and costs. Our laws are more comfortable for the fraudsters than for those preferring prompt repayment of loans.
4 years ago
Very informative ! Kudos for a hard hitting eye opening articles on this day light decoits ! Shows Govt & RBI r only bystanders !
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