As ordinary people sweat, PSU banks wash hands off Rs 1.54 trillion in bad loans

While the common man is struggling hard to withdraw small sums of money from the banks after the demonetisation move, the public sector banks (PSBs) are in the process to write off huge amounts of bank loans availed by big businesses and their promoters. 

There were 661 Non Performing Assets (NPA) accounts above Rs 100 crore amounting to Rs 3.78 lakh crore from public sector banks as on March 31, 2016, Minister of State for Finance Santosh Kumar Gangwar said in the Rajya Sabha on Wednesday.

These banks have written off Rs 1.54 lakh crore of bad loans between April 2013 and June 2016, Parliament was informed on Wednesday. During 2013-14, all PSBs had written off Rs 34,409 crore of NPAs. The amount increased further to Rs 49,018 crore in the following year. Banks wrote off NPAs of Rs 56,012 crore during 2015-16, Gangwar said in a written reply to the Rajya Sabha.

For decades, banks lent huge amounts of money to big business houses and their owners who failed to pay back. Political nexus of these businessmen helped this trend to continue unabated till banks’ cash reserves dwindled to ridiculous levels. The banking industry needed massive infusion of cash to remain alive and the current demonetisation drive brings in that much needed cash to the banks. And, a slower withdrawal because of scarcity of new currency notes ensures that the cash remains with the banks, which can finally be able to lend and be back in the business.

The major question in the entire process that remained unanswered was what to do with the NPAs, which was in the range of Rs six lakh crore by the end of March 2016. One way to address this problem was to recognize them as NPA and write it off.

That’s the approach the government seems to have taken but arguably this is the biggest plunder of public money and a huge let down millions of account holders who could deposit the money easily but could never secure a bank loan as easily as the high and mighty. This has crippled the nation’s economic growth and created huge unemployment and industrial backwardness.

Gangwar further said that Rs 15,163 crore write-off of NPA has taken place during the first quarter of the current fiscal. As on September 30, gross NPAs of public sector banks rose to Rs 6,30,323 crore as against Rs 5,50,346 crore by June end. This works out to an increase of Rs 79,977 crore on quarter on quarter basis. He further said that the government has taken sector-specific measures (infrastructure, power, road textiles, steel etc) where NPA is high.