Outstanding loans amounting to Rs 68,607 crore of top 50 wilful bank loan defaulters in India, including firms of Mehul Choksi and Vijay Mallya have been technically written off till September 30, 2019, the Reserve Bank of India said in a Right-to-Information (RTI) response.
However, an unnecessary controversy has broken out over RBI revealing that banks have written off bad loans worth Rs 68,607 crore. There seems to be a presumption among certain sections that banks will not go after the debt of these 50 top defaulters and allow them to go scot-free, which is totally incorrect.
‘Writing-off’ of a bad loan does not mean that the loan has been forgiven. It means that the bank has made 100% provisioning (setting aside capital) against the loan, to protect depositors even if not a rupee of that loan is repaid. Banks use write-offs to remove bad loans from their balance-sheets and minimise their tax liability.
The borrower will not be exempt or pardoned from debt repayment as banks will not stop recovery. Therefore, banks do not lose interest in the written-off asset and may recover their loan in part when the bad loan reaches resolution. When a value is realised, the provisions are written back. A write-back goes into the profit and loss account of the bank, and boosts the bank’s accounts.
Here’s a look at the top 10 among the the 50 wilful defaulters and the amounts that had been written off until September, 2019.
Inputs from News18, LiveMint, Economic Times