A social media Publish accompanying a Hindi newspaper extract, the title of which loosely translates to “Banks waived loans amounting to 68,000 crore from 50 willful defaulters including fugitives Nirav and Mehul” is widely distributed as if the news clip was recent. Through this article, let us verify the facts alleged in the message.
Claim: Recent News Clip – “Banks waived loans amounting to 68,000 crore from 50 willful defaulters including fugitives Nirav and Mehul”.
Fact: This is an old news clip, dating back to April 2020. A response from RTI revealed that banks had written off loans to the tune of Rs. 68,607 crores, and that these write-offs include loans taken by businesses owned by Nirav Modi, Mehul Choksi and Vijay Mallya. Even the viral news clip mentioned the same thing in the article, however, the clip had a misleading headline claiming these loans were canceled which is not true. In the event of a write-off, the banks simply eliminate these loans from the balance sheets, but the accounts continue on the bank books and the banks can recover these loans in the future. Therefore, the claim made in the message is MISLEADING.
This is an old news clip dating back to April 2020, in which a response from RTI revealed that Indian banks had written off Rs. 68,607 crores of debt from top 50 voluntary defaulters till September 30, 2019 .
In response to a petition filed by activist Saket Gokhale, RBI released the list of top 50 willful defaulters and the list includes companies owned by fugitive economic offenders Nirav Modi, Mehul Choksi and Vijay Mallya. Several news agencies reported the news at the time and the viral clip is also part of it (here & here). A congressional leader shared the copy of RTI’s response on Twitter, which can be viewed here.
However, it should be mentioned that the banks did not waive these loans but canceled them. According to RBI, write-off only erases bad debts from bank balance sheets, but those bad debts continue to remain on the bank books and banks attempt to recover those bad debts through other means. Write-off of a bad loan is not the same as cancellation.
Even the viral news clip clearly mentioned that the loans were canceled, however, the clip had a misleading title saying that the loans had been canceled which led to the post going viral. The main differences between forgoing a loan and canceling it are mentioned below.
Cancellation vs Waiver:
Write off a loan is a general practice put in place by banks to clean up their balance sheets. In the event of a write-off, the lending banks clean the bad debts from their balance sheet, however, the loan account remains to continue with the lending bank as they may try to recover it later. Also, if collateral is attached to the loan, the lender confiscates it.
Whereas in the case of a loan waiver, the lender completely cancels the loan account and the borrower is released from debt. If a guarantee is linked to the debt, it will be returned to the borrower. So the banks have just written off these bad debts and have not completely given up on them as the post claims.
85% of total defrauded funds seized/seized in case of Mallya, Modi & Choksi
In addition, the Directorate of Execution (DE) has recently said that Vijay Mallya, Nirav Modi and Mehul Choksi defrauded public sector banks resulting in a total loss of Rs. 22,585.83 Crores to the banks. The ED further said that assets worth Rs. 19,111.20 crores were seized under the provisions of the PMLA. Out of which assets worth Rs 15,113.91 crore were returned to public sector banks. In other words, 84.61% of the total funds defrauded in these cases were seized/seized and 66.91% of the total loss from the banks was returned to the banks/confiscated from the Indian government.
To sum up, an old news clip with a misleading title about banks canceling loans from voluntary defaulters is being shared as recent.