Bank Loan News: Banks have written off bad loans of Rs 10 lakh 9 thousand 511 crores over the last five years, starting in 2017. Only 13 percent of the loan’s entire value could be recovered during this time by Scheduled Commercial Bank.
The highest amount that banks could have put in write-off accounts in 2018–19 was Rs 2.36 lakh crore, according to the RBI. This amount will be 1.57 lakh crores in 2021–22. Gitanjali Gems’ largest loan, at 7.1 crores, was wiped off.
What was spoken in the parliament by the finance minister?
Nirmala Sitharaman responded to a question in the Rajya Sabha by stating that in accordance with RBI regulations, banks have to place the funds in a discount account. To recover it, the bank is using a tribunal and a court. Nobody will be pardoned.
Know what NPA is?
Non-Performing Assets are what NPA stands for. A bank designates an account as NPA when a person or business obtains a loan from it but the profit from that loan stops flowing.
Actually, lending rather than depositing money is the foundation of a bank’s entire business model. The bank may lend 77.5% of the total amount deposited, under the new RBI regulation. The banks get money from the interest generated by this loan.
Large corporations or individuals frequently stop contributing to their profit, at which point the bank designates the account as NPA.
Discount account: what is it?
When a business purposefully fails to make a deposit after receiving a loan, the bank deems that business to be in wilful default. He deposits his loan proceeds into the discount account concurrently. Loan write-offs have an impact on bank profits.
Three reasons why banks write off money
- A significant factor is businesses’ political clout. The majority of politically connected businesses’ loans are forgiven by the bank.
- Banks must present clean account records. As a result, many companies have to write off their loans. It is a process, though.
- Businesses taking out loans frequently go bankrupt. The business’s owners depart the nation. The bank writes off the loan even in these circumstances.
Sum written off in public sector banks over the past five years
- Year Rupees (in approx)
- 2017-18 1.61 lakh crore
- 2018–19 2.36 lakh crore
- 2019-20 2.34 lakh crore
- 2020-21 2,002,0 crore
- 2021-22 1.57 lakh crore
Is the money deposited into the discount account refunded?
No. According to the rules, the bank tries to reclaim the debt. However, this recovery seldom occurs or never occurs at all in the majority of cases.
Take 2020–21 as an example. Out of the 1.76 lakh crore rupees that banks wrote off, just 33 thousand crore rupees were able to be recovered.
There is a lot of political discussion surrounding the write-off account
this discussion was political in nature under every government. Numerous businesses had their money wiped off during the last years of UPA-2.
In the five years leading up to 2009–2014, Rs. 1.22 lakh crore was written off, the research claims. BJP was in opposition at the time and frequently criticized the Manmohan government.
Now that BJP is in power, Congress is criticizing because of write-offs. Rahul Gandhi recently claimed during a rally in Gujarat that while the government forgives industrialists’ loans, it does not do the same for farmers.
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