Bad Loans

It is learnt that the word ‘technical write-off’ which has been accepted by Indian banking is not used anywhere in the world. We don’t consider ‘technical write-off’ as write-off. Though technical write-off of bad loans is resorted to with the objective of cleansing the balance sheet and not with the objective of altogether giving up the recovery measures, it is a highly non-transparent system and without any uniform policy as admitted even by RBI officials. There’s plenty of room for wrong-doing in the guise of technical write-off. Another aspect is that technical write-off is resorted to more in the case of high ticket loans and very less in the case of small loans and small borrowers are more

There is another side of the picture. As known to all, huge provisioning for NPAs and write-offs have been eating into the vitals of  banks, seriously impacting their profitability, reserves, NOF, CAR etc. And all these are periodically ‘made good’ by the Government through ‘infusion of fresh capital’. Wherefrom does the money come for all this? The answer is : by consistently and irrationally increasing the charges for various banking services, by bringing more and more services under the fees network, by increasing various taxes, by introducing new taxes etc. And who will bear brunt? The answer is : the hapless common man. As of now, every activity inside banks (except breathing by the customers) is charged. And on the other side, many sections of willful defaulters of loan are left scot free. These are all hard core facts.

There should primarily be a fool proof system to subject the technically written off assets to scrutiny jointly by RBI officials and established audit firms. Further, it is high time that RBI started periodically publishing bank-wise data of NPAs along with technically written off NPAs, recovered portion of technically written-off NPAs and also the list of top NPAs.  And, there should be no laxity in resorting to all possible recovery measures against willful defaulters irrespective of their money power or political clout or any factor for that matter.

We find the NPA problem every five or ten years. When the economy is doing well, it will be under the surface and when the economy is not doing well, it will come up. It was there in mid-80s and then it came in 2000s and again in 2008-09 and then in 2016-17, thanks to Mallyas and the like and more and more banks nose-diving into loss. Nevertheless, NPA remains to be a subject more talked about and debated upon rather than acted upon and tackled.