When loan defaulters get rewarded with write-offs

l2015081468507As a student of literature and later as a journalist with the Indian Express group, I always found that we all meet our nemesis when good is rewarded and evil is punished.

Famous Greek tragedy Oedipus Rex by Sophocles, Hamlet by William Shakespeare and Dr Faustus by Christopher Marlowe are its most apt examples.

However, when it comes to our banking system, instead of action, the government shores up banks that create bad loans by waiving these off.

Recently, the government has given 22,915 crore to 13 public sector banks under the Indradhanush plan which proposes to give them 70,000 crore in four years.

Reason: the non-performing assets (NPAs) of banks have almost doubled in just one year, from 2.78 lakh crore in 2014-15 to 5.39 lakh crore in 2015-16.

As many as 29 public sector banks have written off a whopping 1.14 lakh crore of bad debts during years 2013 and 2015. Bad debts stood at 15,551 crore for the financial year ending March 2012, they had shot up by over three times to 52,542 crore by the end of March 2015.

Figures collected from various sources reveal that bad loans written off by banks during 2004 and 2015 amounted to more than 2.11 lakh crore.

The State Bank of India wrote off bad debt of 21,301 crore in 2015, Punjab National Bank (6,587 crore), Indian Overseas Bank (3,131 crore), ­Allahabad Bank (2,109 crore) and so on.

Standalone SBI figures may appear big but if we take into account the fact that SBI is about three times larger than the next largest bank in the country in terms of business, it would mean that it is amongst the banks with less NPAs.

The Ministry of Finance takes the plea that write-offs are basically technical and writing off of NPAs is a regular exercise conducted by banks to clean up their balance sheets without foregoing the right to recovery.

The argument that public sector banks have to do risky social sector lending does not seem justified because most willful defaulters are in the corporate sector.

The role of powerful vested interests, middlemen and corrupt bankers in the cases of non-performing assets is questionable.

Till regulatory authorities and enforcement agencies tighten up their noose, banks will continue lending to unscrupulous business houses and organisations while financial institutions would keep on technically writing off loans to clean up balance sheets. The question remains as to where will the buck stop!