Indian Overseas Bank (IOB) is the latest to join other big banks that have written off bad loans worth thousands of crores of rupees and recovered paltry amounts from defaulters. Strangely though, IOB refused to share this information under the Right to Information (RTI) Act and instead asked the applicant to check its annual reports.
Data shared by Pune-based RTI activist Vivek Velankar shows that IOB has written off a massive Rs41,392 crore as technical write-offs in the past eight-year period from FY12-13 to FY19-20. As against these write-offs, the recovery was just 17% or Rs7,253 crore.
What is strange is the way IOB has refused to furnish information under the RTI Act to Mr Velankar. It simply asked Mr Velankar, who is also president of the Sajag Nagrik Manch, to check IOB's annual reports for finding out the write-offs and recoveries of bad loans.
More shocking is the Bank's response, or the lack of it, citing peculiar reasons. IOB told Mr Velankar that under RTI, "Information sought for is not readily available and culling out of such information will disproportionately divert the resources of bank and will affect normal working of the bank. Under the RTI Act, central public information officer (CPIO) can provide only that information, which is available and existing with public authority."
An aggrieved Mr Velankar asks, "When other banks have information about write-offs and recovery of bad loans, how come IOB has no such details in its records? If for a moment, we even agree with its position, then how is IOBs recovery department functioning if there is no record of loan write-offs?"
“The information about loans written off and the recovered amount is part of the bank’s mandatory reporting to the Reserve Bank of India (RBI). This data is also used by the bank’s own staff for recovery. So how can it deny the information and say it will affect normal working of the bank?” Mr Velankar asks.
Further citing the COVID-19 pandemic situation, the Chennai-based public sector bank (PSB) took its own time of 50 days to reply to the RTI filed by Mr Velankar. As per the RTI Act, the PIO (public information officer) is mandated to reply within 30 days of filing the application.
Technically, 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), IDBI Bank and Punjab National Bank (PNB) 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).