Over 50% of Rs 2.9 Lakh Cr Bank Loan Waivers Linked to Big Industries, Services Sector in FY23: Govt

New Delhi: Banks waived loans worth Rs 10.6 lakh crore in the past five years, of which over 50% were linked to large industries and services sector.

In financial year 2022-23, scheduled commercial banks waived loans worth Rs 2.09 lakh crore, of which 52.3% or Rs 1.9 crore was for large industries and services sector, Minister of State of Finance Bhagwat Karad informed the Lok Sabha in a written reply on Monday.

In the past five years, banks have written off nearly Rs 10.6 lakh crore, out of which nearly 50% belong to large industrial houses. Karad also said that nearly 2,300 borrowers, each having a loan amount of Rs 5 crore or more, wilfully defaulted around Rs 2 lakh crore.

When asked for the names of the corporates, the Minister cited Reserve Bank of India rules to not disclose the names of the companies for which loans were written off.

“With regard to the name of companies, RBI has informed that it is prohibited to disclose borrower-wise credit information under Section 45E of the RBI Act, 1934,” Karad said in reply to the query by Abdul Khaleque, Mahesh Sahoo and M Badruddin Ajmal.

When asked about the amount of money collected by banks and other lending financial institutions as penalty charges against delay in payment of loan, the Minister said: “RBI has further informed that the amount of money collected by the banks and other lending financial institutions as penalty charges against delay in payment of loan is not maintained by it.”

However, the Minister cited RBI data that said that banks had collected an aggregate amount of Rs. 5,309.80 crore as penal charges, including penalty charges against delay in payment of loans, during the financial year 2022- 23.

In the financial year 2021-22, there was a dip in total written-off loans to Rs 1.75 lakh crore, out of which 39.8% or Rs 69, 533 crore was to large industries and the services sector.

Read Also: Amount Owed by Wilful Defaulters Spikes by Rs 1.2 Lk Cr since March 2019

Data for the past five years shows that the share of large industries and services in bank loan write-offs have always been the highest.

According to a report in Indian Express based on an RTI reply, banks have written off a whopping Rs 15,31,453 crore since FY2012-13, as per RBI data. “However, what is to be noted is that loans written off by banks will remain in the books of banks as unrecovered loans. The central bank RTI reply had said that the banks recovered only Rs 1.09 lakh crore from Rs 5.87 lakh loans written off in the last three years, revealing that they could only recover 18.60 per cent of the write-offs during the three-year period,” said the report.

In June this year, the RBI had proposed a “compromise settlement” with wilful defaulters, which was opposed vehemently by bank unions.

Read Also: Bank Unions Lash out at RBI for Allowing ‘Compromise Settlement’ With Wilful Defaulters

In a joint press statement issued recently (June 13), the unions termed the RBI’s “Framework for Compromise Settlements and Technical Write-Offs” as a “detrimental” step by the central bank which threatens to “compromise the integrity” of the entire banking system, as also undermine the efforts being made by public sector banks to effectively tackle the menace of wilful default of loans.

The unions pointed out that "wilful defaulters significantly impact the financial stability of banks and the overall economy. By allowing them to settle their loans under the compromise, the RBI is essentially condoning their wrongful actions and placing the burden of their misdeeds on the shoulders of ordinary citizens and hardworking bank employees."

Reacting strongly, the unions pointed out that a Standing Committee of Parliament of Finance had, in February 2016, recommended that in the case of wilful defaulters, there should be accountability of nominee RBI directors, Managing Directors and CMDs of banks.

“The list of top wilful defaulters, as suggested by the Standing Committee, is yet to be published,” said the unions, also questioning the RBI why some “crucial posts” still lie unfilled which could lead to “truncated bank boards” quickly reaching “compromise settlements” without facing any opposition.