While the common borrower is still struggling to repay monthly instalments, one more big bank has shown how big defaulters are having their cake and eating it as well without any qualms or worries. Similar to other public sector lenders, Indian Bank too wrote off Rs4,792 crore bad debt of big defaulters (loan of Rs100 crore and above) while recovering just 1% or Rs66 crore from them. Indian Bank gave this information to Pune-based Right to Information (RTI) activist Vivek Velankar.
While sharing partial information, Indian Bank told Mr Velankar to search its annual reports for the past eight years to know the total amount written off and the recovery made during this period. More shockingly, the Bank says it has information of big defaulters, their loan written offs and recovery only for the past three financial years (from FY17-18 to FY19-20) and none for the period prior to it.
As per data collected and shared by Mr Velankar from Indian Bank’s annual reports during FY14-15 to FY19-20, the lender wrote off total bad loans worth Rs10,249 crore and recovered just Rs2,183 crore.
Indian Bank also followed the same route like other public sector banks (PSBs) for denying information like names of big defaulters whose bad loans worth thousands of crores of rupees were written off.
Replying to Mr Velankar, the bank says, "...as we have the obligation to maintain secrecy of our customer's account, details exempted from disclosure under section 8(1)(e) (information available to a person in this fiduciary relationship) and 8(1)(j) as the disclosure of such information could cause unwarranted invasion of privacy of the individual and does not involve larger public interest) under the RTI Act, hence no information is provided.”
Except the State Bank of India (SBI), every other PSB has declined to share information like names and amounts borrowed by big borrowers which turned into non-performing assets (NPAs). Even in the case of SBI, Mr Velankar could access the list of big defaulters because he is a shareholder and had asked the question during the annual general meeting (AGM) of the Bnk.
Coming back to the Indian Bank, Mr Velankar says, "The information about big defaulters and loan write off is often being denied to me under RTI. However, all this information is part of the banks' mandatory reporting to the Reserve Bank of India (RBI), and hence they cannot deny it under any section of the RTI Act. Also, how is it that every bank is citing a different section of RTI Act for such refusal? For example, Canara Bank denied me this information under section 8(1)(j), and Punjab National Bank (PNB) cited sections (8)(1)(d), (8)(1)(j) and 8(1)(e).
"UCO Bank too refused to share the list of names of defaulters under Section 8(1)(d) and 8(1)(e), while Indian Bank is using 8(1)(e) and (8)(1)(j) of the RTI Act to deny the information. Why are these public information officers (PIOs) of our PSBs using different sections of the RTI Act for not revealing the names of big defaulters?"
Interestingly, last year, UCO Bank, which was founded in 1943 under the aegis of industrialist GD Birla, through an advertisement, had declared Yash Birla, great grandson of GD Birla, as a defaulter. In a public notice which also carried a photo of Yash Birla, UCO Bank had said the account was declared a non-performing asset (NPA) on 3 June 2019. (Read: Yash Birla is a Wilful Defaulter, says UCO Bank in a Public Notice
Not only this, a few years ago, banks, mostly public sector lenders, had decided to ‘name and shame’ the guarantors of defaulter borrowers by publishing their photographs and other details in newspapers and on notice boards of bank branches and community centres. This move was heavily criticised by everyone and banks seem to have curtailed this practice.
Mr Velankar asks the same question. "When a common borrower defaults, the same bank publishes his name and all the details through advertisements in newspapers. Why do they want to keep the names of bigger defaulters hidden? Why don’t the 'confidentiality' and 'fiduciary relation' clauses apply while publicising the names of the common borrowers?" he 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.
Such write-offs also debunk the aggressive posturing by the government and policy-makers about their so-called recovery efforts.