In a sharp reaction to Finance Minister Nirmala Sitharaman's strong-worded explanation to RBI writing off loans worth Rs 68,000 crore from 50 wilful defaulters including the like of fugitive businessmen Mehul Choksi and Vijay Mallya, Congress leader P. Chidambaram opined that the waiver vs write-off debate is an academic one. "The debate on waiver or write-off is academic. People who are mighty pleased are Nirav Modi, Mehul Choksi and Vijay Mallya! Rules are made by human beings. If a rule can be made, it can be unmade too," the former finance minister tweeted on Thursday.
He also urged the RBI to direct banks to continue to show unrecovered loans from fugitive business tycoons like Vijay Mallya, Mehul Choksi and Nirav Modi on their books, and make efforts to recover them, rather than writing them off as non-performing assets (NPA). "The only way to undo the monumental error is for RBI to direct the banks concerned to reverse the entries and continue to show the unrecovered loans from the fugitives as ‘outstanding loans’ on their books and take steps to recover them," Chidamabaram said.
The RBI and the finance ministry have been at the receiving end as in a recent RTI reply, the central bank stated that it had technically written off Rs 68,600 worth of loans from 50 top wilful defaulters, including absconding diamantaire Mehul Choksi's Gitanjali Gems and Vijay Mallya's Kingfisher Airlines, till September 2019. The RBI said the amount (Rs 68,607 crore) comprises outstanding and the amounts technically/prudentially written off till September 30, 2019.
Loan write off vs loan waiver
A non-performing asset is written off after all avenues of recovery are exhausted and chances of recovery of due loan seem remote. To clear the balance sheet, all such kinds of loans are written off once for all. It is a regular exercise that banks conduct in order to clean their balance sheet as well as to achieve tax efficiency. Although bad loans are written off, borrowers of such loans remain liable for repayment. Recovery of such accounts, however, happens on an ongoing basis under the legal mechanism.
On the other hand, a loan waiver is the cancellation of recovery or refraining from claiming the dues. In simpler terms, banks will completely give up on such loans and no recovery will be made, as in the case of farm loan waivers. While in cases of writing off, recovery can be made.
Earlier, in the budget session of Parliament, Rahul Gandhi had asked the government to provide a list of top 50 bank loan defaulters in the country, leading to sharp exchanges and uproar in the Lok Sabha. However, the finance minister had refused to reveal the names then. With the RTI response becoming public, Rahul had attacked the Centre government saying, "Now RBI has put names of Nirav Modi, Mehul Choksi and other BJP friends in the list. This is why they hid the truth from Parliament."
However, in a sharp-worded criticism, Sitharaman responded that Rahul and Congress spokesperson Randeep Surjewala were willfully misleading the people, and asked Gandhi to "consult Manmohan Singh on what the writing off is about".
