Punjab National Bank Wrote Off Rs31,966 Crore in Past 4 Years; Recovered only 22% from Big Defaulters
Punjab National Bank (PNB) is yet another public sector lender to have written 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 recover from big defaulters is only 22% at Rs7027.94 crore. 
 
Well-known activist Vivek Velankar obtained this data by filing an application under the Right to Information (RTI) Act. In fact, Mr Velankar had asked for data from FY11-12, but the Bank claims it has no records. 
 
PNB is the second largest of the 17 public sector banks (PSBs) and its top-325 wilful defaulters have an outstanding of Rs22,370 crore. Frequent bailouts, in the guise of recapitalisation by the exchequer, have allowed the loot to go on unchecked. 
 
 
"Question is if the bank provides information only for four out of eight years, which I had asked, does this mean there were no write off of bad debt and recovery as well before 2016? What about the report banks are mandated to submit to the Reserve Bank of India (RBI)? Did PNB submit such regulatory reports to RBI for the previous four year or no? This seems most unlikely as these are mandatory reports and no bank is spared from submitting it to the RBI," Mr Velankar says.
 
Using his earlier experience of checking annual reports of banks to find details of loan write-off, Mr Velankar studied PNB's annual report for the past eight years. What he found was really shocking and shows lethargic ways how PSBs handle RTI queries.
 
He says, "As per the annual reports of PNB, during the past eight years, the bank wrote off total bad loans of Rs61,741 crore. Not much information on recovery of written off loans during that period. Point is if the bank or its public information officer (PIO) is not even aware about what it publishes in its annual reports, how we expect it to be vigilant on recovering bad loans?"   
 
As in the cases of the State Bank of India (SBI), Bank of Baroda (BoB), Bank of Maharashtra (BoM),  Union Bank of India (UBI) and IDBI Bank that have been reported by Moneylife, this is yet another example of massive ‘technical’ write-off with minuscule recoveries, leading to frequent recapitalisation of banks with the taxpayers’ money. Such write-offs also debunk the aggressive posturing by the government and policy-makers about their so-called recovery efforts. 
 
PNB also flatly refused to share names of these defaulter borrowers under RTI. It says, "The information sought cannot be shared being involvement of commercial confidence, the disclosure of which would harm the third party and is available with the bank in fiduciary capacity. Hence the same is exempted from disclosure under section (8)(1)(d), (8)(1)(j) and 8(1)(e) of RTI Act."
 
 
Almost all PSBs hide behind the so-called fiduciary relations, overlooking the judgement given by the Supreme Court. In November 2015, a division bench of justice MY Eqbal and justice C Nagappan had held that the Reserve Bank of India (RBI) cannot withhold information citing 'fiduciary relations' under the RTI Act. (Read: RBI cannot withhold information under RTI citing ‘fiduciary relations’: SC)
 
"In the instant case, the RBI does not place itself in a fiduciary relationship with the financial institutions (though, in word it puts itself to be in that position) because, the reports of the inspections, statements of the bank, information related to the business obtained by the RBI are not under the pretext of confidence or trust. In this case neither the RBI nor the Banks act in the interest of each other. By attaching an additional 'fiduciary' label to the statutory duty, the regulatory authorities have intentionally or unintentionally created an in terrorem effect," the apex court had said.
 
All banks are mandated to furnish information to RBI on bad loans, loans written off and recovery on a periodic basis as part of the statutory requirements. Under such a situation, banks cannot even use the clause of fiduciary relation to deny information under the RTI Act, since this information that they have, had already been submitted to the RBI as a statutory obligation. 
 
As the Supreme Court had rightly pointed out, RBI and the banks have sidestepped the general public’s demand to give the requisite information on the pretext of 'fiduciary relationship' and 'economic interest'. This attitude of the RBI will only attract more suspicion and disbelief in them. RBI as a regulatory authority should work to make the banks accountable to their actions, the apex court had said.
 
Mr Velankar, president of the Pune-based Sajag Nagrik Manch, also reiterates the same thing. He says, "If this information is in commercial confidence or held under fiduciary relation, then how did SBI share the names of its top 225 defaulters, whose loans were written off? Or does the definition of commercial confidence or fiduciary relations change with every bank? Moreover, why do the names and loan amounts written off by these big defaulters need to be kept a secret?" 
 
 "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. However, as State Bank of India (SBI), Bank of Baroda (BoB), Bank of Maharashtra (BoM), Union Bank of India (UBI) and IDBI Bank have shown, most of the times, there is no recovery or negligible recovery for the amounts written off.    
 
As reported by Moneylife, IDBI Bank wrote off total bad loans worth Rs45,693 crore but could recover just 8% of it after spending more than Rs29 crore during 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). 
 
Bank of Maharashtra has written off bad loans of over Rs7,402 crore in the past years, 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

    m.prabhu.shankar

    1 month ago

    Daylight robbery of genuine citizens of this country.

    mahesh.bhatt

    1 month ago

    Gol Maal all over Land Telecom Banks Oil Retail GoI etc All is going in well Mahesh

    komalhema4

    1 month ago

    Common man's blood boils when he reads such reports. Honest taxpayer is squeezed to the extent possible to extract last paise with form26AS, only to make up such write off losses.Even the meagre interest of 2.75% on SBI account is taxable.This is very illogical and unfair.Thisis the money saved after paying tax.The government has no intention to auction properties of defaulting dodgers as they fill pockets of govt officials and pay donation to political parties

    PMC Bank: RBI Appoints AK Dixit as New Administrator To Find Workable Solution
    The Reserve Bank of India (RBI) has appointed AK Dixit, former general manager at Union Bank of India, as the new administrator of Punjab and Maharashtra Cooperative (PMC) Bank.
     
    He will replace JB Bhoria, who, RBI says, is stepping down due to health reasons.
     
    In a release, the central bank says, "While the administrator of PMC Bank and the RBI have been exploring various options for resolution of the bank, several factors such as huge losses incurred by the bank resulting in its entire net worth getting wiped out, and steep erosion in deposits continue to pose serious challenges in finding a workable plan for revival of the bank."
     
    "The bank has also been making efforts for recovery of non-performing assets (NPAs) although the progress has been constrained because of the COVID-19 pandemic and legal complexities. Nevertheless, in the interest of the depositors, the PMC Bank and the RBI are continuing to engage with the stakeholders to explore the possibility of finding a viable and workable solution for the resolution of the bank," RBI says.
     
    Last year on 23rd September, RBI had appointed Mr Bhoria as administrator of PMC Bank. He was the regional director of RBI for Maharashtra and Goa till 2013. But more about Mr Bhoria later.
     
    On Tuesday, the Parliament passed amendments to the Banking Regulation Act to bring cooperative banks under the supervision of RBI, a move aimed at protecting the interest of depositors. The bill, which comes in the backdrop of the PMC Bank scam, seeks to strengthen cooperative banks by increasing their professionalism, enabling access to capital, improving governance and ensuring sound banking through RBI. 
     
    Justifying the need for the amendments, finance minister Nirmala Sitharaman said the government was able to quickly resolve the troubled Yes Bank as it was governed by commercial bank rules, but the resolution to the PMC Bank crisis is yet to be found.
     
    Separately, the Maharashtra government is planning to auction properties of Housing Development Infrastructure Ltd (HDIL) to provide relief to PMC Bank depositors. HDIL is the biggest loan defaulter of PMC Bank.
     
    In a written reply in the state legislative assembly, Satej Patil, minister of state for home had said that HDIL properties would be auctioned to revive PMC Bank. "...a committee appointed under the governor of the RBI is currently assessing the value of HDIL’s properties which were mortgaged with the bank, so that they can be auctioned to revive the financial institution and provide relief to its depositors." the minister said in a written reply.  
     
    Coming back to Mr Bhoria, as reported by Moneylife, his appointment on PMC Bank, however, was not the first time, he had been appointed as administrator of a bank. His previous stint as administrator was not good, even when he headed a bank that had no financial problem.
     
    In 2014, RBI, in its wisdom, decided to place the Nashik Merchant’s Cooperative (Namco) Bank under an administrator. At that time, it was emphasised that Namco Bank was not facing any financial problem. The action related to other issues. 
     
    The Bank’s performance declined during Mr Bhoria’s tenure. According to current chairman Sohanlal Bhandari, the gross non-performing assets (NPAs) of Namco Bank allegedly increased by a whopping 40% to Rs318.67 crore during the administrator’s tenure. 
     
    Mr Bhandari told Moneylife in a telephonic interview, "the less said the better about the tenure of the administrator at our bank. After appointment of the administrator, we expected effective and prudent management at the bank.
     
    "However, in his (Mr Bhoria's) tenure, the financial position of Namco Bank became weak. When Mr Bhoria was appointed as administrator, our bank had a gross NPA of 4.10% and zero net NPA. However, as on 31 December 2018, our gross NPAs increased by 38.38% to Rs318.67 crore while net NPA increased to over 20%."
     
    "During Mr Bhoria's tenure, several unqualified borrowers obtained loans on inflated valuation and at higher loan-to-value ratio. A property valued at Rs1 crore was shown as valued at Rs1.25 crore for the loan purpose. In addition, the bank sanctioned a loan of 70% of this inflated value against the 50% norm that was practiced before appointment of the administrator. Mr Bhoria also pressured bank officials to sanction these inflated loans," Mr Bhandari alleged.  
     
    Mr Bhoria, however, had said, statistics do not always show clear picture, especially in banking. “During my tenure at Namco Bank, I took efforts in increase reserve funds by about Rs200 crore. You can see there is a rise in the bank’s capital to risk (weighted) assets ratio (CRAR) and reserve fund that indicate increase in strength and growth of the bank. Also on sanctioning loans, we have followed all the norms and the decisions to sanction loans were taken by the loan committee after proper scrutiny.”
     
    RBI had appointed Mr Bhoria as administrator for one year in January 2014, after finding some lapses in management practices at Namco Bank. However, Mr Bhoria remained as administrator for about five years. He says, “The decision (to continue to have administrator) was taken by RBI. When they (RBI) asked me to step in, I joined Namco Bank. When they asked me to step down, I handed over the reins to the new board of directors.” (Read: PMC Bank Adminstrator JB Bhoria’s previous stint at Namco Bank Saw a 40% Jump in NPA)
     
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    COMMENTS

    s5rwav

    1 month ago

    Deaclare Mr #ShaktikantaDas the #RBIGovernor as #AntiNational Criminal for Financial Frauds of Thousands of Crores of Public Money and Unpardonable Crimes against #WeThePeopleOfIndia. I am Babubhai Vaghela from Ahmedabad. Thanks.

    US Class Action Suit Alleges Materially False and Misleading Statements by HDFC Bank on Vehicle Loan Business; HDFC Bank Denies Allegations
    The class action suit filed in the US against HDFC Bank Ltd alleges issuance of materially false and misleading statements during the class period by the lender which the investors claim had caused significant losses and damages. Denying all the allegations, HDFC Bank, however, says it intends to defend itself vigorously in the lawsuit early next year.
     
    The lawsuit mentions 31 July 2019 to 10 July 2020 as class period. It seeks to recover damages caused by violations of the federal securities laws by the lender and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, against the Bank and certain of its top officials, including Aditya Puri, Sashidhar Jagdishan and Santosh Haldankar. 
     
    Mr Puri was the managing director of HDFC Bank during the class action period, while Sashidhar Jagdishan, who is successor to Mr Puri, is head of finance at the Bank. Mr Haldankar is HDFC Bank’s vice president and/or senior vice president for legal & company secretary at all relevant times, the lawsuit states.
     
    The lawsuit (copy of which is seen by Moneylife) states, "Throughout the class period, defendants (HDFC Bank) made materially false and misleading statements regarding the bank’s business, operational and compliance policies. Specifically, defendants made false and/ or misleading statements and or failed to disclose that HDFC Bank had inadequate disclosure controls and procedures and internal control over financial reporting. As a result, the Bank maintained improper lending practices in its vehicle-financing operations. Accordingly, earnings generated from the Bank’s vehicle-financing operations were unsustainable. All the foregoing, once revealed, was foreseeably likely to have a material negative impact on the Bank’s financial condition and reputation and as a result, the Bank’s public statements were materially false and misleading at all relevant times."
     
    The lawsuit also refers to a report by Economic Times published on 13 July 2020 before market hours that talks about HDFC Bank's probe about lending practices at its vehicle unit. Revenues generated from HDFC Bank’s auto and commercial vehicle loans are reported as part of the Bank’s retail banking segment.
     
    On 13 July 2020, during pre-market hours, The Economic Times published an article titled “HDFC Bank probes lending practices at vehicle unit.” That article reported that HDFC Bank had “conducted a probe into allegations of improper lending practices and conflicts of interests in its vehicle-financing operations involving the unit’s former head,” the lawsuit states. 
     
    "...the Bank 'decided against proceeding with an earlier proposal to extend the employment of Ashok Khanna, an 18-year veteran at the bank, after the investigation was completed'... [t]he vehicle financing unit [Khanna] headed had outstanding loans of more than Rs1.2 lakh crore ($16 billion) as of 31st March'... [t]he result of the investigation isn’t public, but it followed issues thrown up by an internal audit of the [B]ank’s vehicle-dealer lending, as well as allegations of conflicts of interest in the purchase of global positioning systems for vehicles financed by the [B]ank, according to sources without disclosing what the probe uncovered," the lawsuit stated quoting the newspaper.
     
    The lawsuit claims, "On this news, HDFC Bank’s American depositary share (AD”) price fell $1.37 per share, or 2.83%, to close at $47.02 per share on 13 July 2020. As a result of defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the bank’s securities, plaintiff and other class members have suffered significant losses and damages."
     
    However, in a regulatory filing, HDFC Bank denied the allegations in the class action suit filed in the US. "...we wish to inform you that the Bank is aware of a complaint that was recently filed against the Bank and its three employees in the US. The lawsuit, which was filed by a single small security holder, who seeks to represent a class of the Bank's security holders, is based on allegations that the security holder claims caused a temporary decline in the Bank's ADR stock price in July 2020," the Bank says.
     
    "The Bank denies the allegations and intends to defend itself vigorously in the lawsuit. The Bank expects its response to the lawsuit to be due in early 2021," HDFC Bank says, adding, "Since the lawsuit is at a premature stage, there is no matter at this point of time, which requires disclosure as per Regulation 30 of SEBI (Listing Obligations & Disclosure Requirements) Regulations."
     
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    User 

    COMMENTS

    s5rwav

    1 month ago

    What does Mr #AjayTyagi the #SEBIIndia Chief, Mr #ShaktikantaDas the #RBIGovernor at Mumbai and Mrs #NirmalaSitharaman the Finance Minister of Mr Narendra Modi Govt at Centre since the Year 2014 has to Say other than #SilencePlease? I am Babubhai Vaghela from Ahmedabad. Thanks.

    REPLY

    Newme

    In Reply to s5rwav 1 month ago

    Is this comment intended for the article about case against HDFC Bank in US?

    s5rwav

    In Reply to Newme 1 month ago

    Yes please. I am Babubhai Vaghela from Ahmedabad. Thanks.

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