Finance Minister, SBI chief explain that ‘write-off’ doesn’t mean that borrowers have been let off
At a recent internal meeting of the SBI, it was decided to drop the term "write-off" and instead use the phrase Advance Under Collection Account (AUCA) for all toxic loans pending with industrial houses. But the question here is whether the mere changing of the term will amount to the recovery of the hefty outstanding loans owed to the bank.
In the aftermath of DNA's exclusive report on Wednesday, which revealed that the government bank had written off loans of 63 wilful defaulters, including Rs 1,200 crore of Kingfisher Airlines; SBI chairman Arundhati Bhattacharya said on Wednesday that the term "write off" was confusing.
"No let off of borrowers happened and all processes are focused for full recovery. The words "write off" are technical terms and (if) used in the layman's way of understanding, these words are completely misleading," she said.
Yes, the SBI has perused it. Let's look into the last one-year write-off and recovery outcomes. In the first quarter of the financial year 2017, 'write-off' (transfer to AUCA) amount was Rs 4,613 crore and the recovery in the same period was of Rs 526 crore. Thus, they could have recovered only 11 per cent of the write-off amount in the first quarter of the financial year 2017.
The change was also confirmed by internal documents available with DNA which say SBI is now "replacing the term write-off with transfer to AUCA and write-off transferred to AUCA" with "Accounts transferred to AUCA" consequent upon change in nomenclature". However, the same document shows that for writing of other losses like fraud and dacoity, the term 'write-off' will continue to be used.
AUCA is known as an NPA reduction tool where banks are enabled to clean their toxic loan from balance sheets. The SBI has clearly mentioned that "the main advantage of the bank will have by transfer to AUCA is that our gross NPA amount and net additions in NPAs during the quarter will be reduced to the extent of the amount transfer to AUCA".
The document also added that the bank's claim of recovery process will carry on, on the ground level and if any recovery takes place from such borrowers it will directly contribute to the bank's profit.
Thanks to the DNA report, the term "write-off" caused problems for the government in Parliament on Wednesday. FM Arun Jaitley said that bad loans that had been written-off did not mean that banks would not pursue them.
"There is a little bit of malapropism involved in this. Don't go by the literal meaning of write-off. Write-off does not mean loan waiver. The loan still remains. We still continue to pursue them," the FM said in response to CPM leader Sitaram Yechury. Yechury had referred to the DNA report while questioning the FM on the same.
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