Bank of Baroda (BoB) is the second public sector bank to write off bad loans of several thousand crores of rupees, following the foot steps of State Bank of India (SBI), which wrote off Rs1.23 lakh crore and recovered just over 7% in the past eight financial years. Information about BoB’s write-offs, like that of SBI, was obtained by the Bank’s shareholder and Right to Information (RTI) activist Vivek Velankar.
A document procured by Mr Velankar shows that from 2012 to 2020, BoB technically wrote 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. Mr Velankar says, “There were lot of heated arguments in the country few months ago on written off loans of big accounts. That time it was clarified by the union finance that technical write off does not mean waiving off loans and efforts are on for recovery of these written off loans. Since banks, especially public sector banks (PSBs), are not revealing any information about written off loans and recovery, I am asking these questions as a shareholder to bring it in public domain."
Mr Velankar, who is also president of Sajag Nagrik Manch of Pune says, "As a shareholder, I had asked BoB about loan accounts worth Rs100 and above that were written off during past eight years. I wanted to ask the question during the bank's annual general meeting (AGM) on 31 July 2020. However, did not provide any information. When I asked the question during the AGM, they could not give proper reply. However, I managed to get an assurance from BoB chairman that they will send me this information in writing. After sending two reminders, finally I received information about loans written off by BoB and the pathetic recovery, which just 5%."
However, Mr Velankar says, in this case, Bank of Baroda did not share names of these account-holders citing 'confidentiality'.
The letter providing information on written off loans and recovery is sent by PK Agarwal, company secretary of BoB. It states, "As the information requested relates to borrower. account specific details, we regret our inability to share the same with you in terms of our responsibility as a banker to maintain data confidentiality of our borrowers."
"If this indeed is matter of confidentiality, then how SBI gave me entire list with names and why BoB cannot do the same? When common borrower defaults, the same banks publish his name and all details through advertisement in newspapers, why they want to keep names of defaulters hidden. Why the 'confidentiality' clause does not come while publicising names of common borrowers," Mr Velankar asks.
According him, despite the strict laws brought in by the Central government, Bank of Baroda is not willing to follow it or there may be some vested interests, due to which the Bank is not sharing names of the big defaulters.
Bank of Baroda's reply to Mr Velankar shows that during the eight years from FY12-13 to FY19-20, it has 'fresh technically written off’ a massive sum of Rs21,476.89 crore from its books, but manged to recover only 5% or Rs1,056.53 crore during this period. This entire process makes a mockery of the aggressive claims by a string of high-profile government spokesperson and economic advisers that a ‘technical’ write-off does not stop the recovery process.
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 and then BoB have shown, most of the times, there is no recovery or negligible recovery for the amounts written off.
During 2019-20, BoB has written off a massive Rs10,457.69 crore while recovering just Rs607.86 crore. A year earlier, it wrote off Rs6,443.8 crore, while recovering a paltry Rs316.58. However, when it comes to recovering written off debt, BoB's record is simply awesome. During FY15-16, the bank recovered just Rs4 lakh while writing off bad debts worth Rs781.81 crore!
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 --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) comprises outstanding and the amounts technically or prudentially written off till 30 September 2019.
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