Bank of Baroda Follows SBI, Writes Off Rs21,474 Crore in Bad Loans; Recovers only Rs1,057 Crore in Past 8 Years
Bank of Baroda (BoB) is the second public sector bank to write off bad loans of several thousand crores of rupees, following the foot steps of State Bank of India (SBI), which wrote off Rs1.23 lakh crore and recovered just over 7% in the past eight financial years. Information about BoB’s write-offs, like that of SBI, was obtained by the Bank’s shareholder and Right to Information (RTI) activist Vivek Velankar. 
 
A document procured by Mr Velankar shows that from 2012 to 2020, BoB technically wrote off 97 accounts with bad debts of Rs100 crore and more. These add up to Rs21,476.89 crore over eight years, while recovery in that same period is just 4.91% or Rs1,056.53 crore. Mr Velankar says, “There were lot of heated arguments in the country few months ago on written off loans of big accounts. That time it was clarified by the union finance that technical write off does not mean waiving off loans and efforts are on for recovery of these written off loans. Since banks, especially public sector banks (PSBs), are not revealing any information about written off loans and recovery, I am asking these questions as a shareholder to bring it in public domain." 
 
Mr Velankar, who is also president of Sajag Nagrik Manch of Pune says, "As a shareholder, I had asked BoB about loan accounts worth Rs100 and above that were written off during past eight years. I wanted to ask the question during the bank's annual general meeting (AGM) on 31 July 2020. However, did not provide any information. When I asked the question during the AGM, they could not give proper reply. However, I managed to get an assurance from BoB chairman that they will send me this information in writing. After sending two reminders, finally I received information about loans written off by BoB and the pathetic recovery, which just 5%."
 
However, Mr Velankar says, in this case, Bank of Baroda did not share names of these account-holders citing 'confidentiality'. 
 
The letter providing information on written off loans and recovery is sent by PK Agarwal, company secretary of BoB. It states, "As the information requested relates to borrower. account specific details, we regret our inability to share the same with you in terms of our responsibility as a banker to maintain data confidentiality of our borrowers." 
 
"If this indeed is matter of confidentiality, then how SBI gave me entire list with names and why BoB cannot do the same? When common borrower defaults, the same banks publish his name and all details through advertisement in newspapers, why they want to keep names of defaulters hidden. Why the 'confidentiality' clause does not come while publicising names of common borrowers," Mr Velankar asks.
 
According him, despite the strict laws brought in by the Central government, Bank of Baroda is not willing to follow it or there may be some vested interests, due to which the Bank is not sharing names of the big defaulters.
 
Bank of Baroda's reply to Mr Velankar shows that during the eight years from FY12-13 to FY19-20, it has 'fresh technically written off’ a massive sum of Rs21,476.89 crore from its books, but manged to recover only 5% or Rs1,056.53 crore during this period. This entire process makes a mockery of the aggressive claims by a string of high-profile government spokesperson and economic advisers that a ‘technical’ write-off does not stop the recovery process. 
 
 
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 done 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. However, as SBI and then BoB have shown, most of the times, there is no recovery or negligible recovery for the amounts written off. 
 
During 2019-20, BoB has written off a massive Rs10,457.69 crore while recovering just Rs607.86 crore. A year earlier, it wrote off Rs6,443.8 crore, while recovering a paltry Rs316.58. However, when it comes to recovering written off debt, BoB's record is simply awesome. During FY15-16, the bank recovered just Rs4 lakh while writing off bad debts worth Rs781.81 crore!
 
As per the data provided by SBI to Mr Velankar, Bhushan Power & Steel Ltd, IRVCL Ltd and Videocon Industries Ltd are its biggest defaulters, and had not repaid a single penny. Alok Industries Ltd is the biggest borrower in this list with a written off loan of Rs8,098.05 crore but has repaid Rs1,703.57 crore to SBI. (Read: SBI Writes Off Rs1.23 Lakh Crore of Bad Debt, Recovers Paltry Rs8,969 Crore in 8 Years!)
 
Earlier in April, the Reserve Bank of India (RBI) had said that Indian banks have technically written off a staggering amount of Rs68,607 crore due from --top wilful defaulters, including absconding diamantaire Mehul Choksi. RBI had revealed this information in reply to an RTI filed by Saket Gokhale.
 
RBI said that this amount (Rs68,607 crore) comprises outstanding and the amounts technically or prudentially written off till 30 September 2019.
 
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    COMMENTS

    Umesh Shah

    2 months ago

    Why should any one buy stock of PSU banks when loans are being written off so brazenly ? It is quite obvious that bank officials are hand in glove with defaulters to the detriment of everyone else’s interest. This has been happening at a growing pace year after year and all successive governments have done nothing about it. Imagine what those thousands of crore written off can do for poors of the country !

    Sanjiv.shanbhag

    2 months ago

    Next in line are numerous start ups and stand ups. ...........

    Sanjiv.shanbhag

    2 months ago

    RBI ---- Please announce, for at least last twenty years, total amount written off from loans granted by entire banking sector in India - all banks in public, private, cooperative and others.. ... . ....public money gone down the drains.

    With robust backup support of properly evaluated asset base at reinstatement / replacement valuations, mortgages, hypothecations, liens, sureties and the like, at least 60 to 70 percent of loan amounts could have been recovered, even under depressing circumstances.

    Why no public figures and citizen representatives shout aloud on this !!!

    kalyanam86

    2 months ago

    What a shocking fact! You kindly try to collect such information from pat sector banks like KARUR Vyshali bank, Lakshmi Vila’s bank, ICICI bank etc and publish. All india bank employees association has already released defaulters names.

    REPLY

    sundarbtw

    In Reply to kalyanam86 2 months ago

    Can be collected. But they don't gobble tax payer money as capital year on year...

    Newme

    2 months ago

    Wonder who are the lucky son of a gun Corporates who escaped with 20k crores.

    rajoluramam

    2 months ago

    Finally all the public sector banks write off bad loans. They cannot collect any bad loans as these loans were taken by politically influential people. The most funniest thing is the banks cannot find the addresses of the bad loan people companies. They just disappeared in thin air. They might have started new businesses in other states with all bogus documents. Peculiarity is these banks are turned into profits from losses in the past, while writting off thoudands of crores bad loans. Some body said" my son is failing SSLC always, what to do. His friend suggusted start again from A B C D......... .

    REPLY

    upadhyepr

    In Reply to rajoluramam 2 months ago

    Heading is very misleading lt signifies that 21000 crore is written off in one year whereas recovery is during 8 years it seems just for popularity

    Covid Relief: RBI Extends Scheme for MSME Debt Restructuring
    The Reserve Bank of India (RBI) on Thursday extended a scheme whereby stressed MSME borrowers will become eligible for restructuring their debt, provided their accounts with lenders were classified as 'standard' as on 1 March 2020.
     
    Accordingly, the existing loans to MSMEs classified as 'standard' will be re-structured without a downgrade in the asset classification.
     
    "A restructuring framework for MSMEs that were in default but 'standard' as on 1 January  2020 is already in place," Shaktikanta Das, governor RBI said while delivering the decision of the MPC on monetary policy.
     
    "The scheme has provided relief to a large number of MSMEs. With COVID-19 continuing to disrupt normal functioning and cash flows, the stress in the MSME sector has got accentuated, warranting further support."
     
    According to the RBI governor, this restructuring will have to be implemented by 31 March 2021.
     
    RBI placed eligibility conditions such as the limit of aggregate exposure, including non-fund based facilities, of banks and NBFCs to the borrower should not exceed Rs25 crore as on 1 March 2020.
     
    Besides, the borrowing entity is GST (goods and services tax) registered on the date of implementation of the restructuring. However, this condition will not apply to MSMEs that are exempt from GST registration.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    COMMENTS

    yerramr

    2 months ago

    RBI has not made any mention of Atma Nirbhar Bharat Abhiyan package for MSMEs and pared its forbearance with the scheme. its current extension of Restructuring for standard assets between March1, 2020-March 2021 and continuance of asset categorization is a great welcome departure. Hopefully, Kamat Committee will examine the Revival and Restructuring guidelines of RBI issued in March 2016 and bring out appropriate modifications.

    No current account for customers availing credit via cash, OD from banks
    The Reserve Bank of India (RBI) has come up with additional measures to curb the use of multiple operating accounts for loans wherein banks have been directed not to open current accounts for customers already availing credit in the form of cash or overdraft (OD).
     
    During the video address post the monetary policy committee's meeting, RBI Governor Shaktikanta Das on Thursday noted that while permitting the lending institutions to provide necessary relief to the borrowers through various measures, it is also considered necessary to take appropriate measures for strengthening credit discipline.
     
    "Use of multiple operating accounts by borrowers, both current accounts as well as cash credit (CC)/OD accounts, has been observed to be prone to vitiating credit discipline. The checks and balances put in place in the extant framework, for opening of current accounts, are found to be inadequate," he said.
     
    As such, it has been decided to address the above concerns through appropriate safeguards for opening of current accounts and CC/OD accounts for customers availing credit facilitiesfrom multiple banks, Das said.
     
    "No bank shall open current accounts for customers who have availed credit facilities in the form of cash credit (CC)/ overdraft (OD) from the banking system and all transactions shall be routed through the CC/OD account," according to the RBI guideline.
     
    It added that where a bank's exposure to a borrower is less than 10 per cent of the exposure of the banking system to that borrower, while credits are freely permitted, debits to the CC/OD account can only be for credit to the CC/OD account of that borrower with a bank that has 10 per cent or more of the exposure of the banking system to that borrower.
     
    "Funds will be remitted from these accounts to the said transferee CC/OD account at the frequency agreed between the bank and the borrower. Further, the credit balances in such accounts shall not be used as margin for availing any non-fund based credit facilities," he said.
     
    In case there is more than one bank having 10 per cent or more of the exposure of the banking system to that borrower, the bank to which the funds are to be remitted may be decided mutually between the borrower and the banks.
     
    It may be noted that banks withexposure to the borrower of less than 10 per cent of the exposure of the banking system can offer working capital demand loan (WCDL) or working capital term loan (WCTL) facility to the borrower, the guideline said.
     
    Banks are free to open current accounts of prospective customers who have not availed any credit facilities from the banking system, subject to necessary due diligence as per their board approved policies.
     
    "Banks shall monitor all current accounts and CC/ODs regularly, at least on a quarterly basis, specifically with respect to the exposure of the banking system to the borrower, to ensure compliance with these instructions," the RBI guideline added.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    COMMENTS

    sbs03sv

    2 months ago

    Sanction of any credit limit either CC/OD/TL to any business unit goes through respective accounts that control and help monitor credit discipline of the unit. Debit & Credit summations of respective A/ Cs reflect the end use of fund loaned to borrowers on the basis of parameters of Appraisal, Recommendation & Sanction of credit limits to borrower against acceptance of agreed terms & conditions envisaged in Arrangement Letter signed by borrower. So, the systems of the sanction itself is well within control of Banks. Further, credit is disbursed against Drawing Power against submission of Stock Statememt(CC Limit) on monthly basis to determine the fund to be released. All transactions are routed through the related accounts. It's never allowed to open a different CA to be used for credit related transactions. TL is sanctioned to acquire capital goods and its scheduled repayment programme is routed through CC A/C of the borrower. Any other mode of of operation implies clear departure of credit discipline. The instructions sound confusing.

    yerramr

    2 months ago

    A long overdue measure for checking credit discipline has been put in place. Banks were allowing parking funds in current accounts while the borrowing accounts of CC and OD remain overdue. The policy should have also included that such current accounts should not be opened with other banks when a unit borrows from another bank. We have seen quite a few dexterous entrepreneurs opening current accounts with banks other than the lending bank to deposit the cheques received from their debtors. This is clear credit indiscipline and needs to be checked.

    glnprasad52

    2 months ago

    No sensible banker opens a current account, as those dishonest borrowers avail credit limits with one bank and route all credits through another current account opened in a different bank, and monitoring of account becomes very difficult. This is not new, and every banker makes fundamental inquiries on such limits by Current account holder with other banks. This is primitive and preliminary tactics and the first step towards wilful default.

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