PSBs write off Rs 70,000 cr bad loans in four years
At a time when the UPA government is talking of taking hard decisions to prune “wasteful" expenditure to ensure that the government kitty remains healthy, public sector banks have written off whopping sum of public money as bad loans that end up helping corporates.
For the last four years, pubic sector banks have taken off astronomically huge Rs 70,459 crore loans from their account books.
As per the RBI report submitted to Parliament consultative committee on Ministry of Finance, Rs 11,008 crore (as on March 31, 2010), Rs 17,593 crore (as on March 2011), Rs 15,081 core (as on March 31, 2012), and Rs 26,777 crore ( March 31, 2013) written off by state run banks. Interestingly from 2009-10 to 2012-2013, loan recovery from public sector banks were Rs 60,997 crore while written off amount was Rs 70,459 crore.
Generally banks writing off their bad debts to clean up their balance sheets. This will also help those who owe huge money to banks to escape the CBI dragnet.
Writing off bad debts is normally done in cases where the banks failed to ensure enough collateral against loans offered. As the mortgaged assets are not sufficient to recover their loans, banks have to go in for compromise write-off when such loans turn bad.
Despite the government strict instructions to banks that their write off should not be more than recovery, this was not followed in many cases. For instances in† 2012-2013, the recovery by public sector banks was just Rs 20,288 crore while they have written off Rs 26,777 crore, an official from the Ministry of Finance told Deccan Herald.
As per the report Gross Non Performing Assets (GNPA) of the public sector banks have been increasing year after year. The GNPA of state run banks rose to Rs 1.76 lakh crore at the end of June quarter 2013 from Rs 1.55 lakh crore at March 31, 2013. The NPA is loans, defaulted by the borrowers, which cease to generate incomes for the banks.
While PSU banks accounted for the disproportionate share in this increase in NPAs, the new private sector banks managed to lower their NPA ratio.
†The RBI attributed to increasing GNPAs was to current macro-economic situation in the country, increasing interest rates in the recent past, lower economic growth and aggressive lending by banks in the past especially during good times.
Worried over increasing NPAs, the Finance Ministry has asked banks to take all possible penal action including lodging first information report (FIR) against willful defaulters.
The legal process, wherever warranted, against the borrowers or guarantors and foreclosure of recovery of dues should be initiated expeditiously, the official said.