Indian Overseas Bank Recovers Just 0.5% Out of Rs17,821 Crore Written Off Debt from 66 Big Defaulters, including Bhushan Steel, Lanco group, Frost International, ABG Shipyard, Rotomac and IVRCL
While common borrowers are harassed for recovery of smaller loan amounts, when it comes to big borrowers, banks are often found giving preferential treatment to these defaulters. Nor are the banks willing to part with information regarding these write-offs. In fact, of the 10 public sector banks (PSBs) about which Moneylife wrote, only one lender, namely, the State Bank of India (SBI), had revealed names of big defaulters whose bad debt was written off and not too impressive efforts were made to recover the dues.
 
Indian Overseas Bank (IOB) has now shared the list of its big defaulters, who have borrowed Rs100 crore and more, which were written off from its books. 
 
Information shared by IOB to Pune-based Right to Information (RTI) activist Vivek Velankar reveals that as on 31 March 2020, the Bank wrote off Rs17,821 crore and recovered just Rs102 crore or 0.5% from 66 big defaulters. These big defaulters, whose loans were written off, include Bhushan Steel & Power Ltd (Rs1,274.97 crore), ABG Shipyard Ltd (Rs693.62 crore), IL&FS Financial Services (Rs499.97 crore), Vadraj Cement Ltd (Rs521.8 crore), Lanco Infratech Ltd (Rs510.32 crore), IVRCL Ltd (Rs615.39 crore), Lanco Amarkantak Power Pvt Ltd (Rs875.94 crore) and Frost International Ltd (Rs841.03 crore).  
 
Earlier, when Mr Velankar had asked IOB to reveal details of bad loans written off and the status of their recovery as well as the names of big defaulters with a loan amount of Rs100 crore and above, the Bank had refused to share this information under the RTI Act and had instead asked him to find it out for himself from the Bank’s annual reports. 
 
An analysis done by Mr Velankar had shown that IOB had written off a massive Rs41,392 crore as technical write-offs in the past eight years from FY12-13 to FY19-20. As against these write-offs, the recovery was just Rs7,253 crore or 17%. (Read: Indian Overseas Bank, Another PSB to Write Off Rs41,392 Crore in 8 Years; Recovers Just 17%)
 
However, since IOB refused to share names of big defaulters, Mr Velankar, who is also president of the Sajag Nagrik Manch, had filed his first appeal under RTI. In an order, KN Manorama, general manager and first appellate authority (FAA) shared the list of big defaulters whose loans were written off by the Indian Overseas Bank. 
 
 
The list shared by the FAA shows that, of the 66 big defaulters, IOB could recover a fraction of the amount from only 16 of them. Shockingly, some borrowers have repaid just Re1 or Rs2 against their huge debt that was written off. For example, IOB wrote off Rs615.39 crore bad debt of IVRCL, but recovered just Re1 as per the list provided by the FAA.
 
An aggrieved Mr Velankar says, "Isn't this a mockery of the banking system? And these are the big borrowers, who are not bothered to repay any money and banks like IOB wanted to protect their identity by not sharing names under RTI. Why are banks protecting such defaulters?"
 
"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 non-performing assets (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. This method of writing off loans is being rampantly used by banks and both the finance ministry and the Reserve Bank of India (RBI) need to take strong action against banks indulged in such practices," Mr Velankar says. The rest of the big defaulter have not repaid a single rupee to Indian Overseas Bank. 
 
Here is the list of defaulters who repaid some fractional amounts to IOB against the written off loans as on 31 March 2020...
 
 
As reported by Moneylife, over the past eight years, 10 PSBs wrote off Rs3.85 lakh crore and recovered just Rs43,592 crore from big defaulters.
 
 
 
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.
 
As reported by Moneylife, Bank of India wrote off Rs57,275 crore and recovered just 23% or Rs13,560 crore over the past eight years. (Read: Bank of India Refuses to Share under RTI Information on Rs57,275 Crore Bad Loans Written Off and 23% Recovery in Past 8 Years)
 
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. (Read: Indian Bank Recovered Just 1% in 3 Years after Writing Off Bad Loans Worth Rs4,792 Crore of Big Defaulters)
 
UCO Bank, during FY11-12 to FY19-20, wrote off Rs25,266 crore bad debt of while recovering just 7% or Rs1,702 crore from all defaulters. (Read: UCO Bank Recovered Just 7% after Writing Off Rs25,266 Crore Bad Loans over 9 Years)
 
 During the past eight-year period from FY12-13 to FY19-20, Canara Bank wrote off a total of Rs47,310 crore while recovering just 19% or Rs8,901 crore from defaulters. (Read: Canara Bank: Rs47,310 Crore Write Off in 8 Years; Just 19% Recovery, Latest PSB Loot)
 
Indian Overseas Bank too wrote off a massive Rs41,392 crore as technical write-offs in the past eight-year period from FY12-13 to FY19-20. As against these write-offs, the recovery was just 17% or Rs7,253 crore. (Read: Indian Overseas Bank, Another PSB to Write Off Rs41,392 Crore in 8 Years; Recovers Just 17%)
 
PNB 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. (Read: Punjab National Bank Wrote Off Rs31,966 Crore in Past 4 Years; Recovered only 22% from Big Defaulters)
 
Similarly, IDBI Bank, which became a private sector lender a few months ago, wrote off total bad loans worth Rs45,693 crore but could recover just 8% of it after spending more than Rs29 crore during the past seven years. (Read: IDBI Bank Wrote Off Rs45,693 Crore Bad Loans and Recovered Just 8% in 7 Years)
 
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). (Read: Union Bank of India Writes Off Rs26,027 Crore as Bad Loans in 8 years; Stalls Query on Recoveries and Big Defaulters’ Names)
 
Bank of Maharashtra has written off bad loans of over Rs7,402 crore in the past, while recovering a paltry 4% in over eight years through recovery efforts. The lender wrote off bad debts worth Rs7,402 crore during four out of the past eight years, while recovering just Rs253.55 crore. (Read: Bank of Maharashtra Writes Off Rs7,100 Crore Bad Loans; Recovers Just 4% in 8 Years)
 
From 2012 to 2020, BoB had technically written 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. (Read: Bank of Baroda Follows SBI, Writes Off Rs21,474 Crore in Bad Loans; Recovers only Rs1,057 Crore in Past 8 Years)
 
Similarly, from FY12-13 to FY19-20, SBI, the country's largest lender, wrote off bad loans worth Rs1.23 lakh crore of bad debt but recovered a paltry Rs8,969 crore. (Read: SBI Writes Off Rs1.23 Lakh Crore of Bad Debt, Recovers Paltry Rs8,969 Crore in 8 Years!)
 
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    COMMENTS

    rajuhalwai.rh

    7 days ago

    i have worked in PSB for 24 yrs and also few years in Loan dept with facing endless difficulties ,starting from selecting borrowers to recovery and facing life long bitter experience on retirement in NPA account.
    I always think how come PVT banks do have less problem of NPA (which is worst enemy at present and it will keep troubling in coming years). while comparing i realised that, the borrowers selection with maximum proportion is always first choice and remained pressure from top authority ,as every management wants to show their performance to prove their ability and promotion,job security etc.
    while recovery the in Nationalised banks it remains with Loan officer as he processed the whole proposal. where as in PVT banks it is controlled by separate dept and it start chasing the moment borrower misses first EMI with adding heavy penalty. I have seen borrowers running to deposit EMI on prior day to avoid EMI +penalty but in case of Govt bank they were having attitude, as if they have done favour on bank by taking loan.
    Why difference - PVT banks takes prompt action like immediately auctioning security and when they get good value with allowing balance money minimum but in case of Govt banks the day of security comes very hardly and it gets zero value by the time they start serious action.
    secondly if as a Loan officer is made scapegoat for NPA then off course it will affect next decisions.
    Thirdly pressure of Govt schemes which makes selection of good borrowers quality diluted . Presently situation is much improved and lot of due diligence is done but not allowed level play.

    komalhema4

    1 week ago

    Over the last 6yrs of BJP rule, the interest rate on term deposits have been reduced progressively from 9 to 3.5 %.This is done to give very low interest loan to industries.These coat suit thieves do business with public money .If there is profit,they take and if there is loss do not repay loan .Head I win tail you loose.
    The most affected in this cheating are senior citizens who deposit their life time earnings in bank deposits and over the years the income from deposits has reduced to half of what it was 6yrs ago,making survival very difficulty.

    suketu

    1 week ago

    no surprise.

    umeshs62

    1 week ago

    This is absolutely ridiculous. We have become banana republic. Privatization of banks is the only way out. Government bankers will take the country to laundry.

    REPLY

    umeshs62

    In Reply to umeshs62 1 week ago

    At times, For withdrawing your money from the bank, you have to answer so many questions. Whereas these defaulters, withdraw other people’s money and vanish in the air. Government does nothing either to defaulters or to chor bank officials. Where is the justice in so called democracy?

    Lakshmi Vilas Bank: Proposed Resolution Shows a Shift in Stance by RBI and Indian Govt, Says S&P
    The Reserve Bank of India (RBI)'s swift resolution of troubled Lakshmi Vilas Bank (LVB) will keep contagion at bay and help maintain stability in the banking system. RBI's decision to consider a foreign bank, beyond just homegrown institutions, to bail out LVB demonstrates its willingness to put control of banking assets in foreign entities, says a note from S&P Global Ratings.
     
    The central bank has proposed merging LVB with DBS Bank India Ltd. As part of the proposal, DBIL, the wholly-owned subsidiary of Singapore-based DBS Bank Ltd will inject Rs25 billion into the merged entity to support its financial position. 
     
    S&P Global Ratings says it believes this deal is positive for India's banking sector and will bring the much-needed relief to LVB which has been struggling for many years. 
     
    RBI had put the private-sector lender under prompt corrective action (PCA, or under watch by the central bank) in September 2019, and the search for a white knight had been on since then. "We believe the RBI took into account DBIL's healthy balance sheet and capitalization when considering potential suitors for LVB," the ratings agency added.  
     
    Lakshmi Vilas Bank, which has only a 0.2% market share, is the only non-government-owned bank under PCA. Recently, the shareholders of LVB at their annual meeting ousted seven directors of the Bank, including its managing director and chief executive (CEO). RBI had to step in and appoint a panel comprising three independent directors.
     
    S&P says, "We have always viewed the Indian government as highly supportive of the banking sector. The government has consistently supported weak commercial banks by promoting the merger of distressed institutions with stronger lenders. It has historically not allowed commercial banks to fail and has swiftly stepped in to address trouble. In this case also, the RBI and the government stepped quickly to prevent any loss to the creditors, including depositors, and maintain system stability." 
     
    In the bailout of private sector Yes Bank Ltd earlier this year, the RBI called upon government-controlled State Bank of India (SBI) and other large Indian banks for capital support.
     
    According to the ratings agency, the acquisition of LVB will not materially affect the financial position of DBS. LVB is small when compared to DBS, accounting for less than 1% of the group's total assets.
     
    "That said, LVB will significantly expand DBIL's footprint in India. As of 30 September 2020, LVB had 563 branches, compared with DBIL's 27. The merger could provide a DBIL with meaningful physical presence, which we believe is needed to complement the digital strategy the bank is already pursuing in India. LVB will also help DBS penetrate deeper into southern parts of India," S&P added.
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    COMMENTS

    Udayan Dasgupta

    1 week ago

    How are such deals arrived at? Is there competitive bidding?

    DBS's Ratings Not Immediately Affected by Takeover of Lakshmi Vilas Bank: Fitch
    The proposed takeover by Singapore-based DBS Group Holdings Ltd of India's The Lakshmi Vilas Bank Limited (LVB) is not sufficiently large to immediately affect DBS's credit ratings, says Fitch Ratings. However, the ratings agency says, it signifies about the bank's growth strategy that could shape its earnings and capitalisation risks over the medium term and potentially alter its credit profile.
     
    DBS established 21 new branches in India in 2019 for a total of 33, but the proposed transaction will add as many as 563 branches, a greater number than that of all other foreign banks in India put together. LVB's network is focused in south India, with three-quarters of its branches located in three states - Tamil Nadu, Andhra Pradesh and Karnataka. 
     
    Fitch says, "We regard LVB's branches as one of its most coveted residual assets for a foreign buyer and believe the ready-made platform that will enable deeper market penetration is the key draw for DBS."
     
    According to the ratings agency, DBS pivoted to a hybrid physical-digital approach after incorporating a local subsidiary in 2019 and aims to build out more than 100 physical touchpoints across India by the end of the year, having previously emphasised a digital banking model. 
     
    "The proposed acquisition dovetails with the bank's stated strategy and could significantly accelerate its ambitions in India upon successful integration to help it reap growth opportunities in the medium term. LVB's balance sheets amount to less than 1% of DBS's risk-weighted assets (RWA), assets and equity, meaning it will not immediately affect the group's asset quality, profitability or capitalisation and, consequently, its credit ratings," Fitch added.
     
    India's banking system is under significant stress and Fitch says it has a negative outlook on the operating environment, whose factor midpoint of 'bb' is eight notches lower than Singapore's 'aa-'. The net loans of DBS Bank India Ltd, DBS's onshore subsidiary, made up less than 1% of the group's loan portfolio at end-June, but should this proportion increase materially in the next few years, it could weigh on the bank's blended operating environment factor score, on which Fitch already have a negative outlook.
     
    According to the ratings agency, a weaker assessment of DBS's operating environment into the 'a' category would have significant ramifications for its financial profile and would almost certainly lead to a downgrade of its standalone credit ratings. 
     
    "We do not envision its Indian business expanding at such a pace, but we are watchful if the proposed LVB acquisition is a harbinger of aggressive balance sheet expansion - whether organically or inorganically," Fitch added.
     
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