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?"
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."
"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.
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).