SBI Writes Off Rs1.23 Lakh Crore of Bad Debt, Recovers Paltry Rs8,969 Crore in 8 Years!
While the banking regulator and the Union government have been busy clarifying that bad loans written off does not mean a waiver, documents procured by Vivek Velankar from State Bank of India (SBI) reveal minuscule recovery of these bad debts. Information received by Mr Velankar shows that as against a write off of Rs1,23,432 crore, SBI has recovered just over 7% or Rs8,969 crore over the past eight financial years.
 
Mr Velankar, president of Pune-based Sajag Nagrik Manch, says, "I tried obtaining this information under Right to Information (RTI) Act, but SBI denied it claiming that collating this information would be a waste of its resources. Being a shareholder of SBI, I then asked for this information as question for the annual general meeting (AGM). I did not get a chance to ask my question during the AGM, but the bank shared this information, which is quite shocking. This also exposes how the bank writes off loans of 100s of crores of rupees of large defaulters while denying waiver of simple interest on loans for common customers."
 
The Bank’s reply to Mr Velankar shows that during the eight years from FY12-13 to FY19-20, SBI has 'technically/prudentially written off’ a massive sum of Rs1.23 lakh crore from its books, but manged to recover only 7% or Rs8,969 crore in this period. This makes a mockery of the aggressive claims by a string of high profile government spokesperson and economic advisors that a ‘technical’ write-off does not stop the recovery process. The fact is that once a loan turns bad in India, it is almost impossible to recover anything because it has already been ever-greened for several years, said a former bank chairman to Moneylife.
 
(Source: SBI)
 
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 SBI has shown, most of the times, there is no recovery or negligible recovery for the amounts written off. 
 
As per the data provided by SBI to Mr Velankar, Bhushan Power & Steel Ltd, IRVCL Ltd and Videocon Industries Ltd are its biggest defaulters, and had not re-paid a single penny. Alok Industries Ltd is the biggest borrower in this list with a written off loan of Rs8,098.05 but has repaid Rs1,703.57 crore to SBI. 
 
Here is the list of loan portfolios worth Rs500 crore and above that were written off by SBI.
 
 
Earlier in April, the Reserve Bank of India (RBI) had said that Indian banks have technically written off a staggering amount of Rs68,607 crore due from 50 top wilful defaulters, including absconding diamantaire Mehul Choksi. RBI had revealed this information in reply to an RTI filed by Saket Gokhale.
 
RBI said that this amount (Rs68,607 crore) comprising outstanding and the amounts technically or prudentially written off till 30 September 2019. 
 
Topping that list of top-50 defaulters to Indian banks, was Mr Choksi's scam-hit company, Gitanjali Gems Ltd, which owed Rs5,492 crore, besides other group companies, Gili India Ltd and Nakshatra Brands Ltd, which had taken loans of Rs1,447 crore and Rs1,109 crore, respectively.
 
Mr Choksi is currently a citizen of Antigua & Barbados Isles, while his nephew and another absconder diamond trader Nirav Modi is in London.
 
The second in the list is REI Agro Ltd, with an amount of Rs4,314 crore, and its directors Sandip Jhujhunwala and Sanjay Jhunjhunwala who are already under the scanner of the Enforcement Directorate (ED) since over a year.
 
The next on the list in the Rs4,000-crore bracket is absconding diamantaire Jatin Mehta's Winsome Diamonds & Jewellery owing Rs4,076 crore and which is being probed by the Central Bureau of Investigation for various bank frands.
 
In the Rs2,000-crore category, there is the Kanpur-based writing instruments giant, Rotomac Global Pvt Ltd, part of the famed Kothari group, which owed Rs2,850 crore.
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    COMMENTS

    gopaliyer1950

    2 weeks ago

    1.On SBI recovery rate , only redeeming feature is that last 2 years. recovery rate is around 10 %. 2 .It is a fact that banks efforlessly write off large lians, but would not waive even interest for genuine small borrowers. 3.List of defaulters include Reliance communications.I suppose part of Ambani group !

    bala.shanbhag

    3 weeks ago

    Sir, it does not mean amount is 'written off' and borrower need not pay ! As per the Prudential Norms, Provision is made for these amount out of the profit of the Bank. These cases are either under court, or under recovery process. If the provision is not made as per 'norms', Bank is simply showing higher NPA on the asset side and reserve on liability side. Higher percentage of NPA gives wrong picture of the Bank. Hence, it can not be construed as 'Written off', or borrowers need not pay !Eg. In case of Nirav Modi, Vijay Mallaya's cases, banker can not simply show NPA till recovery will make prudential write off, as recovery takes time. It does not mean, they are let off. New lawas like : Fugative Offenders Act... etc.. take time to adjust the amount even if the amount is recovered. Which may please be noted.

    tillan2k

    3 weeks ago

    ahhahaah SBI Sickening Bank of India

    mohd_aslam_ansari

    3 weeks ago

    I wonder why the properties/assets of defaulters are not being attached. Include properties of the concerned bank officials too for recovery. What about the guarantees or mortgages provided for obtaining such huge loans? And how these entities are still running their businesses?

    REPLY

    tillan2k

    In Reply to mohd_aslam_ansari 3 weeks ago

    They have partners and patrons at high places

    ramchandra.karve

    3 weeks ago

    The Willful Loan Defaulters such as Mallya, Nirav Modi, Mehul Choksi and others deserve to be stripped at Public Places and flogged all over their bodies with Red Hot Iron Rods. They should not be extended Public Health Facilities, supply of electricity and water to their premises should be discontinued by the Government . Ramchandra Karve

    jjain782

    3 weeks ago

    I understand nobody can touch cheats Nexus between criminals and bank officials has to be broken Crime can be committed only with the help of bank officers, they must be punished first
    There should be at least 100 Sucheta Dalalas to wake up the authorities all the best

    umeshs62

    3 weeks ago

    Cheating is in our blood. It has become part of our culture. PSU officials are hand in glove with scamsters. Give a loan of few hundred crores to a scamster, take a cut of few crores and you are set for life. Scamster needs courage to grease a few palms, borrow and disappear. If he is dragged to court then the same process will be followed.

    REPLY

    rs235m

    In Reply to umeshs62 3 weeks ago

    Court case will go on for 10 years and many officials will be transferred or will retire on this time.Only few unlucky scamsters like L P yadav go to jail.That too government does not recover the scam money.

    tillan2k

    3 weeks ago

    If it was not owned by GOI and bankrolled by tax payers SBI long ago would have become SICK Bank of India

    prime

    3 weeks ago

    SBI's market carp is 1.67 lakh crore. So this writeoff is about 75% of its market capitalization. Any other company would have gone bankrupt long back. But we still plod along with SBI and PSU banks instead of putting the bankers and defaulters in jail.

    Let's remember that for every Singal, Jivrajka, Dhoot, Choksi, Modi, Jhunjunwala, Mehta, there is at least one politician and 5 bankers guilty.

    hamungel

    3 weeks ago

    Surprising to see Ruchi Soya's Rs.746 crore write off. Why couldn't SBI get shares worth this amount?

    rs235m

    3 weeks ago

    Is SBI a Dharamsala for giving donations to rich people by robbing the middle class taxpayer and also senior citizens who solely survive on the bank interest. Part of the written of amount might have gone to political parties ,Babus , bank executives who are in connivance with suit boot industrialists.It is a joint" loot and share "program.

    mahesh.bhatt

    3 weeks ago

    Welcome to Babugiri Liberalised India Aam Aadmi banking services charged in pennies 1 Re pens tied downs 7% loan recoveries done all automated processes Manager's undercuts above in all transactions of loan approvals Global mess in India Royally RBI dossiers? Mahesh Bhatt

    ganeshchopade09

    3 weeks ago

    7 Lakh Crore Bad Loans Written Off In Decade, 80% Of It In Last 5 Yrs ( This doesn't include FY2020 Figure). In last 8 year country's largest lender SBI manage to recover mere 8969 Crore against 1.23 Lakh crore written off!!

    mywopy

    3 weeks ago

    That sum what got wasted away at SBI is more than 3% of our nations annual budget.

    Like someone addressed these psu bankers a while ago, a group of heartless bankers.

    They should be asked to quit their jobs in shame for failing the trust of this great nation and its people.

    REPLY

    richard

    In Reply to mywopy 3 weeks ago

    Thanks for your comment. It had a deep insight with the reasons for the NPA. There is also another serious one and that is corruption with the connivance of the Bankers. They granted these loans by taking kickbacks.

    dn.prakash

    3 weeks ago

    Before reforms came in 1991, Banks were taking collateral securities/personal guarantee of Directors. After the reforms, along with economic growth, demand for credit was huge and competition among banks started leading to agressive lending. The Banks also started marketing of products(at the advise of consulting firms). Credit Department were given huge targets leading to the top executives chasing the corporate borrowers so that targets are met faster. Banks forgot secuirty and guarantee aspects in their greed for business. Crony capitalists found this opportunity and took in principle sanction from one lead bank and showing that letter they started bargaining with other banks. Top executives who want to reach targets became guinea pigs for these corporates. Somewhere during 2001-2008, RBI permitted Corporates to borrow short term loans (less than a year) beyond the consortium in the name of excess liquidity in the system. This helped these corporates to avail short term loans to pay overdues and keep the account out of NPA at the cost of Banks themselves. It went to such an extent, Banks have lent against brand value (imaginary sums) and all today's major defaulters got benefit of this. Today when the music stopped, banks are holding assets in books which have hardly any value. No surprise banks recovering only 10% to 20% of loans.

    REPLY

    richard

    In Reply to dn.prakash 3 weeks ago

    Thanks for your comment. It had a deep insight with the reasons for the NPA. There is also another serious one and that is corruption with the connivance of the Bankers. They granted these loans by taking kickbacks.

    PMC Bank Crisis: RBI Trying To Find Workable Solution, Says Governor Das
    The Reserve Bank of India (RBI) is trying to find a workable solution in the Punjab and Maharashtra Cooperative (PMC) Bank matter as losses in the bank are very high and have eroded deposits by more than 50%, says RBI governor Shaktikanta Das. However, it has been almost 10 months since RBI has been trying to find out a workable solution in the PMC Bank crisis. 
     
    Speaking at the 7th Banking and Economic Conclave organised by State Bank of India, Mr Das, says, "With regard to the PMC Bank, the Reserve Bank is engaged with all stakeholders to find out a workable solution, as losses are very high, eroding deposits by more than 50%."
     
    Last month, while enhancing withdrawal limit to Rs1 lakh for PMC Bank customers, the central bank had said that more than 84% of the depositors of the Bank will be able to withdraw their entire account balance.
     
    Overall, this was the fifth time the central bank has increased the withdrawal limit after imposing the regulatory restrictions last year under the provisions of the Banking Regulation Act.
     
    According to a statement, RBI has been engaging with the stakeholders to explore the possibility of a resolution of the Bank. 
     
    "However, the process has been affected due to the lockdown on account of corona virus (COVID19) and the continuing uncertainty around the pandemic. Further, the extent of the negative net worth of the bank, and the legal processes involved in recovery of bad debts also pose challenges or limitations in resolution of the bank."
     
    "Nevertheless, consultation with various stake-holders and authorities for resolution of the bank is continuing. It is, therefore, considered necessary to extend the aforesaid Directions for a further period of six months to take the process forward," RBI had said last month.
     
    The PMC Bank scam broke after Housing Development and Infrastructure Ltd (HDIL), a single borrower which accounted for 73% of PMC's loan book, went bankrupt. 
     
    HDIL, in collusion with PMC Bank executives, created thousands of fake customer accounts to re-route funds to itself.
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    COMMENTS

    specsypies

    3 weeks ago

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    specsypies

    3 weeks ago

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    anujaarora007

    3 weeks ago

    Its a long wait, by saying that deposits are being eroded one is sending out panic messages to the clients of PMC Bank. These days everything that goes wrong is being blamed on the Pandemic but our comatose RBI officials are forgetting that the people are suffering since last September when there was no hint even of the dreaded Coronavirus. Another six months will perhaps go by with just the same news and still nothing concrete is being done.

    Long Recovery Path for Indian Non-bank Financial Institutions: Fitch
    A near-term recovery for India's non-bank financial institutions (NBFIs) is not probable, as the sector continues to wrestle with the fallout from the coronavirus pandemic, says Fitch Ratings.
     
    An investor poll at the annual Fitch on India event, held in early July 2020, revealed that more than 75% of participants believed Indian NBFIs would take more than one year to show a convincing recovery in light of the effects of the pandemic.
     
    It says, "The poll results are in line with Fitch's expectations. We believe the significant economic disruption and prevailing uncertainty caused by the pandemic will impede a return to a more normal operating environment for NBFIs, with consequences for new loan disbursements, asset quality and provisioning, sector profitability, and funding conditions." 
     
    "We see uncertainty stemming from depressed consumer demand and a sustained high level of coronavirus infections, notwithstanding a gradual economic reopening that has improved collections and funding availability since June 2020," it added.
     
    According to the ratings agency, the sector is nearly two years into its crisis, which was triggered by the default of Infrastructure Leasing & Financial Services (IL&FS) Ltd, and nearly 40% of investors polled still expect it to take another two years before a recovery is evident.
     
    "This is longer than Fitch's base-case assumption, but a downside scenario - where the economy continues to struggle to recover in the aftermath of the pandemic - could prolong the sector downturn beyond the two-year horizon and cause irreversible damage to parts of the NBFI industry, with mid- to small-sized franchises at greatest risk of branch closures and staff redundancies to trim costs. In this scenario, more firms could exit from underperforming business segments," it added.
     
    As per the ratings agency, construction finance is one area that is ripe for downsizing, with several announced portfolio sales and strategic shifts aimed at shrinking the segment amid delayed construction activity and lower unit sales. Other segments that may also witness consolidation should the downturn persist include infrastructure finance, low-yielding corporate loans as well as loans against property in urban areas.
     
    Nonetheless, Fitch says, NBFIs in India are highly differentiated and some lending segments will benefit from a quicker recovery. "Those in the gold-backed loan sector could see an earlier revival due to lower ticket sizes, greater market confidence in the loan collateral and a more robust outlook for the rural sector, where many larger gold lenders are focused. Other commercial segments, such as commercial vehicle finance, should see a gradual pick-up as freight demand improves - although Fitch expects India's GDP to remain weak in the next quarter or two, contracting by 5% in the fiscal year ending March 2021 (FY21) before recovering to 8% growth in FY22". 
     
    "We believe a sector turnaround is only likely once loan repayments recover and liquidity buffers have been replenished following months of depressed collection inflow. This would also stabilise NBFIs' current credit ratings. Strengthened capital adequacy would also help to shore up credit profiles in the face of an anticipated hike in bad debts upon the expiry of the regulator's loan relief," the ratings agency says.
     
    Accordig to Fitch, NBFIs with competitive advantages and stronger franchises—mainly the sector leaders - are better placed to navigate these hurdles. 
     
    Fitch-rated entities have reported gradual improvements in loan collections and funding access over the past month with the reopening of the economy. 
     
    "Equity issuance may also pick up in the near term as issuers seek to bolster capital positions," the ratings agency says, adding, "A number of NBFIs, such as Shriram Transport Finance Co Ltd, Mahindra & Mahindra Financial Services Ltd, L&T Finance Holdings and HDFC Ltd have announced equity issuance plans in recent weeks."
     
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    COMMENTS

    tillan2k

    3 weeks ago

    for fast recovery put delinquents like DHFL behind bars with druggists and drunkards ..

    renukaviru

    4 weeks ago

    FOR FINANCIAL STABILITY PATH IS ALWAYS LONG LONG--HORSE FOR LONG RACE.
    POINT IS SUSTAINABLE MANAGEMENT SUPPORT AND TRUSTWORTHY PROMETORS.
    LET US HOPE FOR THE BEST.

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