Twenty-eight state-owned banks wrote off a total of Rs 1.14 lakh crore of bad debts between financial years 2013 and 2015 but the answer to who approves such write-offs depends on which bank you are asking.
The Indian Express filed Right to Information (RTI) applications with 28 public sector banks (PSBs) and one of the questions it asked was who had the final say in writing off loans to the tune of Rs 100 crore or more as non-performing assets (NPAs).
One of the most intriguing replies came from the State Bank of India (SBI), the largest bank in the country, which said that the approval is granted “as per the discretionary power of respective committee”. The SBI did not elaborate what it meant by “discretionary power”, whether the committees are permanent or are formed to deal with individual cases.
For Bank of India, which wrote off Rs 41,361 crore in the last six years, determination of authority depends on the amount to be written off. It said the final nod comes from “the delegated authority” based on the sum to be written off.
The IDBI claimed that disclosure regarding the final authority to declare huge sums as NPAs is exempted under Section 8(1) (d) of the RTI Act and that the information is only for “internal purpose.”
A public authority can refuse to part with information citing Section 8(1) (d) of the Act when disclosure of information, including commercial confidence, trade secrets or intellectual property, will harm the competitive position of a third party. But when larger public interest warrants disclosure of such information, an RTI plea cannot be blocked under this provision.
When The Indian Express sought his comments, K C Chakrabarty, former Deputy Governor of the Reserve Bank of India (RBI) handling the department of banking supervision, said, “I have already said write-offs are a big scam. All confusion is about technical write-offs. There is no procedure or no policy for technical write-offs.”
Chakrabarty said banks cannot deny information on loans being written off to owners, shareholders and the regulator. “For example, the Bank of England publishes sector-wise write-offs. It is time shareholders ask such questions at the annual general meetings,” he said.
The Syndicate Bank, however, also declared it to be a matter of “commercial confidence” while refusing to reply on the authority for write-offs though it provided year-wise break up of NPAs. The UCO Bank declined to part with any information regarding the write-offs and its authority, stating that such information relate to commercial confidence and trade secrets.
The State Bank of Travancore said the final authority is determined as per delegation of financial powers, approved by the bank’s board and committees at various levels up to the executive committee.
In Punjab National Bank, Bank of Baroda, Allahabad Bank, Indian Bank, Central Bank of India and Corporation Bank, the board of directors approve write-offs to the tune of Rs 100 crore and more.
For Canara Bank, Dena Bank, Vijaya Bank and Bank of Maharashtra, the final say rests with the management committee of the board whereas. In State Bank of Mysore, State Bank of Bikaner & Jaipur, State Bank of Patiala and State Bank of Hyderabad, the executive committee approves such write-offs.
The Indian Overseas Bank and Andhra Bank did not mention the authority nor did they provide information on write-offs, stating details regarding NPA portfolio of the entire bank is not maintained on an annual basis and no larger public purpose will be served by diverting resources to create or maintain such data.
In response to an RTI application filed by The Indian Express, the RBI had in February disclosed that while bad debts stood at Rs 15,551 crore for the financial year ending March 2012, they had shot up by over three times to Rs 52,542 crore by the end of March 2015.
In other words, while bad loans of public-sector banks grew at a rate of 4 per cent between 2004 and 2012, in financial years 2013 to 2015, they rose at almost 60 per cent. The bad debts written off in financial year ending March 2015 make up 85 per cent of such loans since 2013.
Taking suo motu cognisance of The Indian Express report on PSBs writing off Rs 1,14,000 crore in the last three years, the Supreme Court directed the RBI to submit a list of defaulters who owe Rs 500 crore or more to the banks.
Adducing the list, the RBI said it was “extremely necessary” to keep these names confidential due to their “fiduciary relationship”. A bench led by Chief Justice T S Thakur is likely to hear the matter Tuesday when it will also take up the RBI’s plea to keep the list confidential.