The Bank of Maharashtra, a public sector bank, has “technically written off” a staggering over Rs 7,000 crore owed by loan defaulters in the last four years. The bank has said that it would recover the amount at a later stage and that it has not been waived permanently.
Activist and bank shareholder Vivek Velenkar said that information regarding BoM “writing off” Rs 7,000 crore of defaulters’ money has apparently surfaced for the first time. “I had sought information regarding the amount written off by the bank in the last four years. The bank has given me a written reply stating that Rs 7,000 crore defaulters’ money has been technically written off,” he said.
According to information provided by the bank — accessed by The Indian Express – from 2011 to 2020, it has written off a total of Rs 7,400 crore. The major write-offs have come in the last four years when Rs 7,000 crore has been written off.
Velenkar said the information was provided during the online annual shareholders meeting held on Tuesday. “The annual report of the bank never mentioned the technically written-off amount. This prompted me to seek a reply from the bank,” he claimed. “…it told me that Rs 7,000 crore is of those who have defaulted over Rs 100 crore,” he said.
“I had sought to know from the bank about defaulters who owe more than Rs 100 crore to the bank. The bank refused to provide the information. It has written to me that such information cannot be disclosed as it is of confidential nature,” Velenkar said.
Stating that the State Bank of India has provided him names of defaulters above Rs 100 crore, Velenkar said, “Both are public sector banks. How can there be two different rules for banks in the same sector? The shareholders have a right to know who these defaulters are. These are not small defaulters…”
In a statement, BoM said the amount has been technically written off, which means it will be recovered at a later stage.
“Technical write-off is only adjusting the provisions in the bank book at head office level, while the balance with the bank branches will continue for recovery. As these accounts are at different stages of recovery and legal recourse, bank is awaiting resolution and decision. The bank is expecting recovery in technical write-off accounts in future,” the bank said in an official statement.
As for Velenkar’s contention that BoM should make public names of defaulters with over Rs 100 crore, bank officials said this information comes under the confidential clause and therefore cannot be shared. “As for Velenkar’s claim that SBI has shared the information, that is a claim and we cannot comment on it,” officials said, adding that the bank was determined to recover the amount and was not protecting anyone.
Banking expert Sadashiv Khengre said banks resort to “technical write-offs” in a bid to show less non-performing assets (NPAs) and show the balancesheet as clean. “The ‘technically written off’ amount is deleted by the bank from the balance. This is an attempt by the bank to shore up its image by presenting a healthy balancesheet,” Khengre said.
Khengre said though the amount is written off technically, it does not mean that it has been waived off permanently. “The bank reserves the right to recover the amount at a later stage. The amount is not lost forever. The bank waits for the right opportunity to recover the amount. Actually, the process for recovery continues and when the bank thinks this particular amount cannot be recovered in the near future, it writes off the amount from balancesheet temporarily.”
Khengre said whenever this written-off amount is recovered, it becomes an advantage for the bank. “The bank can show this as profit. The amount directly goes into profit and loss account. No taxes are deducted,” he said. Khengre said some banks publish the names of defaulters. “However, banks which published the names were sued by the defaulters. Therefore, banks are wary of making the names of defaulters public,” he said.
Velenkar said though the bank claims that it will recover this amount at a later stage, the process of recovery is extremely slow. “Since 2011 to 2020, the bank has managed to recover only Rs 253 crore. In some years, it has recovered zero amount. This means, bank officials are going slow on defaulters,” he alleged. Bank officials, however, said they were following RBI norms with regard to the recovery process.
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