₹68,607-Cr Loans for Vijay Mallya, Nirav Modi are NOT Forgiven. Here’s Why

Money Matters

₹68,607-Cr Loans for Vijay Mallya, Nirav Modi are NOT Forgiven. Here’s Why

Illustration: Reynold Mascarenhas

According to a reply under RTI by the Reserve Bank of India, Indian banks have technically written off a staggering amount of ₹68,607 crore. RTI Activist Saket Gokhale had filed an RTI query with the RBI seeking details of the top 50 wilful defaulters and their current loan status until February 16.

Topping this hall of shame was Mehul Choksi’s scam-hit company Gitanjali Gems, which owes banks ₹5,492 crore. Second on the list was REI Agro Ltd with an amount of ₹4,314 crore followed by Jatin Mehta’s Winsome Diamond & Jewellery owing ₹4,076 crore. Other posterboys of fraud included Nirav Modi and Vijay Mallya.

The news story kicked off a political storm as Congress’s Rahul Gandhi brought up a clip from Parliament, where he’d asked the names of the 50 biggest bank thieves in the country and Finance Minister Nirmala Sitharaman refused to answer. “Now the RBI has put the names of ‘friends’ of BJP including Nirav Modi, Mehul Choksi in the list of bank thieves,” he said.

Senior Congress leader Randeep Singh Surjewala attacked the government, saying that small scale industries, shops, and business were stalled while the government was pardoning ₹68,607 crore of bank robbers who head abroad and have now been forgiven.

The government hit back with a well thought-out retort. Sitharaman responded in a series of late-night tweets, claiming that this was a brazen attempt to mislead the people by sensationalising facts and taking things out of context.

“Wished Shri.@RahulGandhi consulted Dr. Manmohan Singh on what this writing-off was about. Provisions are made for NPAs as per the four-year provisioning cycle laid down by the @RBI. Upon full provisioning being done banks write-off the fully provided NPA but continue to pursue recovery against the borrower. No loan is waived off,” she tweeted.

What the finance minister stated was also echoed in simpler terms by I&B Minister Prakash Javadekar, stating that “No loan has been waived off. Write off is a normal accounting process and it doesn’t stop recovery or action against defaulters.”

The finance minister went on to cite cases of Nirav Modi, Vijay Mallya and Mehul Choksi, giving details of the value of attachments and seizures of movable and immovable properties. She also provided updates on the process being followed to get them extradited from foreign countries.

The political potshots around this contentious issue are far from over, as Randeep Singh Surjewala posed more questions for the finance minister after her clarification.

A blog in The Economic Times explains that writing off loans does not mean the loan if forgiven. “A needless controversy has erupted over RBI revealing that banks have written off bad loans worth Rs 68,607 crore in its response to Right-to-Information (RTI) query. The presumption in some quarters that banks will not pursue the debts of these 50 top defaulters and let absconding diamantaire Mehul Choksi or liquor baron Vijay Mallya go scot-free is wrong. The writing-off of a toxic loan does not mean the loan has been forgiven.”

Another article in Business Standard clarifies, “The write-offs are technical or prudential in nature, which means the banks have made 100 per cent provisions against the loans. However, this doesn’t mean the banks have given up the right to recover the loans.”

Even as the debate heats up in India, Vijay Mallya is probably following it on TV with a glass of expensive wine in hand, and Nirav Modi with an Ostrich Hide jacket on, worth 10,000 pounds.