In the last 5 years from 2017 till now, banks have written off bad loans worth Rs 10 lakh 9 thousand 511 crore. During this, Scheduled Commercial Bank was able to recover only 13 percent of the total loan. After adding the loan to the discount account, the banks have also removed this balance from the ledger account.
According to RBI, in the year 2018-19, banks deposited the maximum amount of Rs 2.36 lakh crore in write-off accounts. In 2021-22, this figure is 1.57 lakh crores. The maximum loan (7.1 crore) of Gitanjali Gems was written off.
What did the Finance Minister say in the Parliament?
In response to a question in the Rajya Sabha, Nirmala Sitharaman said that under RBI rules, banks have put the money in a discount account. The bank is resorting to tribunal and court to recover it. No one will be forgiven.
Know what is NPA?
NPA stands for – Non Performing Assets. When a person or company takes a loan from a bank and the profit of that loan stops coming, then the bank declares that account as NPA.
In fact, the whole business of bank’s profit is based on lending more than depositing money. According to the new rule of RBI, the bank can give 77.5% of the total deposited money as loan. The interest that comes from this loan is the profit of the banks.
Many times big companies or people stop giving profit money, after which the bank declares that account as NPA.
What is discount account?
Even after taking a loan, when a company deliberately does not deposit money, the bank declares it a willful defaulter. At the same time, he puts the money of his loan in the discount account. Banks’ profits are affected by loan write-offs.
Why does the bank write off money, 3 reasons…
- Political clout of companies is a big reason. The bank writes off the loans of most of the companies that are close to power.
- Banks have to show their account books clean. Because of this, the loans of many companies are written off. However, it is a process.
- Many times the companies taking loans become insolvent. The owners of the company leave the country. Even in such times, the bank writes off the loan.
Amount written off in public sector banks in 5 years
year rupees (round off)
2017-18 1.61 lakh crore
2018-19 2.36 lakh crore
2019-20 2.34 lakh crore
2020-21 2.02 lakh crore
2021-22 1.57 lakh crore
Does the money put in the discount account get forgiven?
No. The bank tries to recover the loan under the rules. However, in most of the cases this recovery does not happen at all or if it happens it is negligible. Understand by example- In 2020-21, banks wrote off about Rs 1.76 lakh crore, out of which only 33 thousand crore rupees could be recovered.
There is a lot of politics regarding write-off
There was politics in every government regarding the written off account. In the last years of UPA-2, the money of many companies was written off. According to the report, in the five years till 2009-14, Rs 1.22 lakh crore was written off. At that time BJP was in opposition and attacked the Manmohan government a lot.
Now BJP is in the government and Congress is attacking on account of write-off. Recently, in a rally in Gujarat, Rahul Gandhi said that the government is waiving the loans of industrialists, but does not waive the loans of farmers.