PSU banks’ NPAs since 2007: Rs 25,000 crore

BAD ASSETS

New Delhi: When everyone was raising a toast to the success of government-nurtured public sector banks (PSBs) for their canny business sense and for having posted robust growth backed by huge profits in the downturn, these desi financial institutions quietly wrote off bad debts running into thousands of crores in each financial year just to give their bottomlines a clean look. 

    According to statistics submitted by the finance ministry in Parliament, the government banks together in the last three years, since 2007, have written off nearly Rs 25,000 crore. The figures are alarming when compared against the net recovery of these government entities and the fact that a part of these write-offs included one-time settlements (OTS) that the banks entered with its defaulters by agreeing to take a token amount against their outstandings and close the case.
    This OTS scheme of banks had led to the fall of many criminal cases being prosecuted by the CBI in various courts in the past, leading to the intervention of the Supreme Court last year. Surprisingly, in many such cases the investigative agency had enough evidence of a collusion of bank officials with "willful'' defaulters. 
    According to government data, in 2007, against a recovery of Rs 9,200 crore, these PSBs had written off more than Rs 9,400 crore. The story was repeated in 2008 when against a recovery of Rs 9,300 crore these banks had written off Rs 8,000 crore. The net recovery in 2009 was about Rs 11,000crore while write-offs exceeded Rs 7,400 crore. 
    The government's claim that it has managed to bring down the level of NPAs from a high of 18% in 1997 to 2% at the end of March 2009 sounds hollow and highlights an alarming trend of "cooking'' books to present a healthy status. Though in the previous year, a portion of the write-offs also included agricultural loans, the net NPAs of these PSBs at Rs 44,000 crore at the end of last fiscal against an outstanding of Rs 21 lakh crore is likely to see a surge given these banks exposure to commercial real estate. 
    The total outstanding credit to the commercial real estate of Indian banks, both government-owned and private, at the end of March 2009 was Rs 91,500 crore as against Rs 63,000 crore till March 2008. This was not only an increase of 45% over the previous year but was more than double the amount of Rs 44,000 crore exposure of these banks during the boom period of 2007. 
    The major portion of this huge lending came from government banks.