Following in the footsteps of other large public sector banks (PSBs), Central Bank of India too wrote off Rs17,239.74 crore and recovered a paltry 7% or Rs1,205.92 crore over the past eight financial years from big defaulters. As it has become a norm with PSBs, Central Bank too denied sharing names of big defaulters under the Right to Information (RTI) Act.
Information shared by the Bank with Pune-based RTI activist Vivek Velankar shows that the Central Bank has written off Rs17,239.74 crore as technical write-offs in the eight-year period from FY12-13 to FY19-20. As against these write-offs, the recovery was just 7% or Rs1,205.92 crore. This applies only to loan defaults of Rs100 crore and more.
In its reply, the Bank says, "Year-wise recovery in particular accounts of Rs100 crore and above is not available with us. However, total recovery in those accounts till FY19-20 is Rs1,205.92 crore."
Overall, for the past eight years, Central Bank wrote off Rs21,988.60 crore while recovering just Rs1,922.69 crore from all defaulters, the information shared under RTI shows.
Mr Velankar, who is president of the Pune-based Sajag Nagrik Manch, also pointed out various excuses used by PSBs while declining to share names of big defaulters. He says, "So far only State Bank of India (SBI) had shared names of its big defaulters. But maybe it shared because I had asked the information as a shareholder during SBI's annual general meeting (AGM). But then, two other banks, where I am a shareholder, declined to provide me with the names of defaulters with a loan of Rs100 crore and more."
While Bank of Baroda (BoB) and Bank of Maharashtra (BoM) denied sharing names of big defaulters to Mr Velankar as a shareholder, other lenders like Union Bank of India, IDBI Bank, which became a private sector lender a few months ago, Punjab National Bank (PNB), and Indian Overseas Bank (IOB) refused to divulge these details under the RTI Act using multiple excuses.
Many banks, however, have used 'confidentiality of borrowers', 'fiduciary relations' as excuses for not sharing names of defaulters of Rs100 crore and above.
An aggrieved Mr Velankar says, "If this indeed is a matter of confidentiality or fiduciary relations, then how did the SBI give me the entire list with names and why can’t the other lenders do the same? When a common borrower defaults, the same banks publish his name and all details through advertisement in newspapers. Why do they want to keep the names of defaulters hidden? Why doesn’t the 'confidentiality' or 'fiduciary' clause apply while publicising the names of common borrowers?"
The strangest reply the Pune-based RTI activist received under the RTI Act came from the Indian Overseas Bank (IOB). The Bank told him, "Information sought for is not readily available and the culling out of such information will disproportionately divert the resources of the bank and will affect the normal working of the bank. Under the RTI Act, the central public information officer (CPIO) can provide only that information which is available and existing with a public authority."
"When other banks have information about write-offs and recovery of bad loans, how come IOB has no such details in its records? The information about loans written off and the recovered amount is part of the bank’s mandatory reporting to the Reserve Bank of India (RBI). This data is also used by the bank’s own staff for recovery. So how can it deny the information and say it will affect normal working of the bank?” Mr Velankar asks.
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.
Mr Velankar says, “There were a lot of heated arguments in the country a few months ago on written off loans of big accounts. At that time it was clarified by the union finance ministry that technical write-off does not mean waiving off loans and efforts are on for the recovery of these written off loans. Since banks, especially PSBs, are not revealing any information about written off loans and recovery, I am asking these questions as a common customer of banks to bring it in the public domain."
According to the RTI activist, all big claims about strict adherence to the recovery of written-off loans are hollow. "The information provided to me as a shareholder by SBI, BoB, BoM and Union Bank of India, IDBI Bank, PNB, and IOB proves that something is not right the way bad loans are written off and almost no efforts are being made to recover these loans."
"Basically, there is no control on banks either by the Reserve Bank of India (RBI) or the finance ministry," the RTI activist says, adding, "In fact, since these are written off debts and are no longer part of the balance sheet of the banks, nobody really keeps an eye on this and banks are taking undue advantage of this. It also shows how these PSBs who talk big about transparency are in reality more keen on hiding things from public view."
PNB too wrote off a massive Rs44,565.59 crore as technical write-offs in a four-year period from FY16-17 to FY19-20 . As against these write-offs, the recovery was just Rs12,027.97 crore. If one were to look at large loans of Rs100 crore and above, the technical write-off in this segment alone is Rs31,966 crore, while the recovery from big defaulters is only 22% at Rs7027.94 crore.
Union Bank of India too wrote off bad debt worth Rs26,072.81 crore between FY11-12 and FY19-20 (this information pertains only to loans of over Rs100 crore).