Rs 25 lakh crore bank loans written off since 2014?

In its two terms, the UPA government had written off Rs 3.76 lakh crore of bank loans between 2004 and 2014, but since 2014, the Modi government has written off Rs 25 lakh crore, claimed a report in the Free Press Journal on Wednesday. This figure, relating to the nine years since 2014, is 810 per cent higher than the write-offs during the 10 UPA years. It is also a lot higher than what the government had declared in Parliament.

The report says the disclosure was part of a reply from the Reserve Bank of India (RBI) to a Surat-based right to information (RTI) activist, stating the figure of Rs 25 lakh crore and providing a break-up as well. Loans worth Rs 10.41 lakh crore, the reply says, were written off in ‘public’ banks and an additional Rs 14.53 lakh crore in scheduled commercial banks, taking the total to a staggering Rs 24.95 lakh crore, just about 10 per cent of which has been recovered by the banks.

The reply from RBI also mentions that the average annual loan write-offs in the UPA years was around Rs 34,192 crore, while the average annual write-offs in the Modi years has been around Rs 2.72 lakh crore.

The report and the staggering figure of Rs 25 lakh crore written off in the last nine years have caused consternation because the government claims the banks have written off Rs 10.57 lakh crore in the last five years and Rs 15.31 lakh crore since 2012-13.

In August 2022, minister of state for finance Bhagwat K Karad had provided the figure of Rs 9.91 lakh crore written off in the five years between 2017 and 2022, in a written reply to the Rajya Sabha.

The minister’s reply mentions figures of Rs 2.36 lakh crore written off in 2018-19, Rs 2.34 lakh crore in 2019-20 and Rs 2.02 lakh crore in 2020-21. In 2021-22, the write offs came down to Rs 1.57 lakh crore while in 2017-18, the figure amounted to Rs 1.61 lakh crore.

Credit information of all borrowers with aggregate credit exposure of Rs 5 crore and above are provided by lending institutions to RBI under its Central Repository of Information on Large Credits (CRILC) database. The CRILC data in respect of wilful defaulters is maintained from 2018-19 onward. The total number of wilful defaulters stood at 10,306 at the end of March 2022, the minister informed the Rajya Sabha.

A circular issued by RBI in July this year was titled ‘Framework for compromise settlements and technical write-offs’. Under the compromise settlement, the bank agrees to a haircut and settles for less than the payments due while closing the loan accounts. But technical write-offs are loans written off from the books for accounting purposes, though the bank retains the right to recover the loan.

The circular raised eyebrows because the RBI was allowing loans to be restructured even in the case of wilful defaulters and fraud. It also allowed culprits to benefit from the compromise and return to the bank for more loans after a minimum ‘cooling off period’ of 12 months. In September, the RBI issued another guideline stating that wilful defaulters should be barred from loans for fresh units for a period of five years. These restrictions will be codified into law after receiving feedback from stakeholders.

The write-offs may become a potent issue in the election season, with the growing public perception that politically-connected corporations secure loans from nationalised banks with the intention of defaulting later.

There is good reason for such perception as PSU banks account for 75.9 per cent of gross NPAs compared to 61.9 per cent of advances.