Public sector banks (PSBs) evidently have little interest now in the recovery of written off bad loans, especially from big defaulters, and are focused instead on merely keeping the account books clean and non-performing asset (NPA)-free, by writing off bad loans. This is brought home afresh by State Bank of India's (SBI’s) point blank refusal to provide information, to one of its own shareholders, regarding the names of big defaulters, who had defaulted on loans of Rs100 crore and above, and on recoveries made from the written off loans of these defaulters.
The information was sought for the second year in a row by Pune-based activist Vivek Velankar, who is a shareholder of SBI. Last year, SBI had parted with this information only when he demanded it as a shareholder’s right (SBI Writes Off Rs1.23 Lakh Crore of Bad Debt, Recovers Paltry Rs8,969 Crore in 8 Years!
), but not under the Right to Information (RTI) Act. This year, even that has not been honoured by the Bank, discarding even a pretence of accountability to the affected stakeholders.
This deprives a legitimate shareholder of SBI to raise the issue during its forthcoming annual general meeting (AGM) on 25th June.
In its reply, Sham K, assistant general manager for compliance and company secretary of SBI, told Mr Velankar, "As Bank is under statutory and regulatory obligations to maintain confidentiality of customer data, the Bank is not in a position to share the account or customer specific information."
"Further, relevant information has already been published on page nos. 61 and 62 of the Annual Report 2020 – 21. The Annual Report 2020 – 21 is hosted in the website of the Bank, https://sbi.co.in/web/investorrelations/annual-report," SBI says.
Mr Velankar, who is also president of Pune-based Sajag Nagrik Manch, did search both the pages for obtaining information on NPAs, written off loans and names of big defaulters. This is what he found:
"These two pages are a short summary related with stressed assets management. As per the information, over the past five years, SBI wrote off Rs2.14 lakh crore and was able to recover just 17% or Rs37,188 till 31 March 2021. No information about big defaulters is given," he says.
Last year, Mr Velankar gathered information about loan write off from 12 nationalised banks. It revealed that these lenders had written off a massive of Rs6.32 lakh crore of bad loans. Of these, as much as Rs2.78 lakh crore of the loans written off had been given to big defaulters with borrowings of Rs100 crore and above each. While the government had aggressively claimed that loans written off were being aggressively pursued and recovered, the recovery by these 12 banks from defaulters was just Rs19,207 crore or 7% only. (Read: SBI Writes Off Rs1.23 Lakh Crore of Bad Debt, Recovers Paltry Rs8,969 Crore in 8 Years!
The 12 lenders include the State Bank of India (SBI), Bank of Baroda (BoB), Bank of Maharashtra (BoM), Union Bank of India (UBI), IDBI Bank, Punjab National Bank (PNB), Indian Overseas Bank (IOB), Central Bank of India, Canara Bank, UCO Bank, Indian Bank and Bank of India (BoI). Of these, IDBI Bank was re-categorised as a private sector lender in January 2019 after the Life Insurance Corporation of India (LIC) increased its stake to 51% in the Bank.
Mr Velankar is a shareholder of SBI, BoB and BoM, and used his shareholder’s rights to obtain information from these lenders. For other PSBs, he filed RTI applications. Except SBI and IOB, all other PSBs refused to disclose names of these big defaulters, claiming it as confidential information and that disclosing it would amount to breach of privacy.
This year, SBI also decided to follow suit and refused to share information about big defaulters with its own shareholder. "If a bank has practically lost hopes of recovery and has, hence, written off the loan, why should such a loan get the shield of secrecy? When a common borrower defaults, the same bank publishes his name and all the details through advertisements in newspapers. Why then are the names of bigger defaulters protected? Why don’t the 'confidentiality' and 'fiduciary relation' clauses apply while publicising the names of the common borrowers?" Mr Velankar asks.
In its annual report for FY20-21, SBI says, "...the current level of NPA has significantly come down due to...Stressed assets resolution group (SARG) for providing focus on resolution of NPAs with sector specific approach. At present, the vertical is headed by a managing director (MD), supported by a deputy MD and three chief general managers (CGMs) overseeing the sector-wise portfolio and a CGM (operations) monitoring the credit portfolio of accounts with an outstanding up to Rs50 crore and accounts under liquidation. The account management teams are functioning under the guidance of six GMs. As on March 2021, SARG has 17 stressed assets management branches (SAMBs) and 48 stressed assets recovery branches (SARBs) across the country, covering 49% to 88% of your bank's NPAs and advance under collection account (AUCA), respectively."
This means, there is no shortage of either manpower or authority with SBI to recover loans written off. Yet, this entire team managed to recover just 17% of the total written off debt of Rs2.14 lakh crore.
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.
All this shows an underhand nexus between the banks and the defaulters as a distinct possibility and merits investigation at the highest level.