It has been reported by RBI that banks have written off almost Rs 62,000 crore of loans of top 100 wilful defaulters as of March 2020. The list of willful defaulters has been topped by Jatin Mehta’s Winsome Diamonds & Jewellery, helping them to show lower non-performing assets.
Writing off loans, helps a bank to clear their accounting books and gives them an opportunity to show lower non-performing assets ratio of the institution. A bank with a higher NPA ratio loses its credibility, as high NPA ratio leads to liquidity problems. In other words a certain bank that has higher NPA ratio, has a higher susceptibility of defaulting on repayment of dues of the depositors’ mandates banks to provide fully against NPAs older than four years and thus allow them to write off the loans.
The Reserve Bank of India shared the following data to a query made using Right to Information Act. The query was made by the activist Biswanath Goswami. The data released, showed that Mehul Choksi-owned Gitanjali Gems was the top wilful defaulter, accounting for Rs 5,071 crore of non-performing assets (NPA). Banks, in total, wrote off Rs 622 crore of the firm’s loans.
It was also reported that Banks wrote off humongous amount Rs 3,098 crore of loans of Winsome Diamonds, Rs 2,789 crore of basmati rice maker REI Agro, Rs 1,979 crore of chemicals firm Kudos Chemie, and Rs 1,875 crore of shipbuilding company ABG Shipyard. Vijay Mallya’s Kingfisher Airlines was also featured on the list. The banks wrote off Rs 1,314 crore for kingfisher airline, the data showed.
It is to be noted that the central bank had in August last year denied having details of 100 top wilful defaults in response the RTI petition filed by Goswami. Recently too, RBI did not disclose information on overseas borrowers. They cited a Supreme Court judgement in 2015 as the reason for not releasing the data.
RBI in its letter to the First Appellate Authority stated “Our response in compliance to the First Appellate Authority’s order is furnished,”.
“The way RTI responses are delayed and information suppressed highlights the lack of integrity and transparency in dealing with such matters,” Goswami said.
The latest set of data throws a grim light at the bad loan crises of India. As reported, banks have written off Rs 61,949 crore of loans of the top 100 wilful defaulters as of March 31, 2020. This is against Rs 58,375 crore write-offs as of March 2019. This figure continues to increase each year leading to worsening of NPA crisis of Indian Banking System.
A person familiar with the matter said that total default by these 100 borrowers is Rs 84,000 crore. This implies that the defaulters are still liable to pay off some portion of their dues.
In FY20, the banks wrote off a total of Rs 2.38 lakh and thus brought down the NPA ratio from 9.1% to 8.2%. Thus, the reduction in NPA ratio in FY 20 was largely driven by write -offs.