New Age Bank Robbers Robbing Crores from Indian Banks

KAKALI DAS

In May 2014, Non-performing Asset or NPA of banks – meaning, money which is never returned to the bank – was Rs2.51 lakh crore.

By March 2018, this number increased to nearly Rs10 lakh crore, i.e., four times an increase in 4 years. As a result of this situation, some banks were on the verge of closing.

What is NPA? In other works, how does a Bank earn?

Banks give out loans and get monthly instalment with interest which pays out salaries, expenses, profit, etc. EMI is crucial for bank operations – if for 3 months, EMI of a loan is not paid, then it is declared gross NPA. Banks keep some money aside – which is called provisioning – to keep functioning normally. But, if too many EMIs are missed, then provisioning can deplete and ultimately lead to bank collapse.

What if these bad loans or NPA disappear? This was what happened in the last six years. Banks had written-off a total of Rs11 crore NPA – Rs8 lakh crore in the public sector and Rs3 lakh crore in the private sector. So, we’ve understood what NPA is – loan money that was never retrieved.

What is Loan Write-off?

Loan write-off is an another interesting and a controversial concept. For an instance, students, sometimes, say that they completed the homework, but forgot to bring the notebook – loan write off is along the similar lines.

NPA is an embarrassment for balance sheet, so it is important to discard it to make a neat and clean report. Then, when NPA is put in another sheet, it is called write-off – these loans are virtually alive but hope of recovery is less. If you and I miss out on an EMI, banks will go to great lengths to recoup that amount.

But, when it comes to thousands of crores, banks take a different approach altogether. Earlier, SBI’s net NPA was about Rs1,10,854 crore, and after write off, it becomes Rs27,965 crore. The govt. says that loan is not forgiven – write off must not be confused with – the whole amount will be retrieved slowly.

But, now, Nirmala tai is ‘angry’ (as she always is) because of the 10 lakh crore write off – and only an amount of 1 lakh 32 thousand crore recovered so far, i.e., merely 13-14% of the total money. Our finance minister Nirmala Sitharaman said that banks should recover to about 40%.

But, it’s very difficult for that to happen – why? Because, those who withdrew money are new age bank robbers – either they ran away or case is stuck in court. The list of defaulters is long, and you may not even know the names as they remain in shadows.

You must have seen a famous advertisement of a pen company, Rotomac. Started in 1992, it expanded fast in India and soon became leading exporter of pens. Because exports help the country’s economy, the govt. tries to help exporters, for example, by giving low interest loans.

When two countries agree on big volume trade, and the manufacturer does not have the capital – a loan is taken, which will be returned after delivery and profit. This is how loan functions in a business trade – known as a Letter of Credit. Rotomac took advantage of this system. Indian overseas bank alleged that Rotomac devolved 11 letters of credit – did not pay back.

The total loan amount was about Rs743.63 crores, with no security. As laymen, here, we have to submit all the details, past records, assets, liabilities, etc. to get a small loan. After CBI raid on Rotomac, total default amount was found to be Rs2919 crores. Case was registered against company directors – Sadhana Kothari and Rahul Kothari.

Now, the bank is saying that they had slightly doubted while granting the loan to the company. It is surprising that companies can secure thousands of crore of loan money while we get scrutinized from top to bottom for merely a 10 lakh of loan.

You may have heard about a company named Frost International. CBI, after raiding this company found that this company fooled the Bank of India and 14 banks of Rs4000 crores. In the movie, Bunty Aur Babli, Rani Mukherji and Abhishek Bachchan sold the Taj Mahal. Frost International was no less. CBI alleged that Frost took the money from banks and used it to give out loans, showing it as trade transaction, but no manufacturing or export was done.

Another name in the list is Zoom Developers PVT. Ltd. The ED registered case against the founders Vijay Chaudhary and Sharad Kabra for fraud of Rs2650 crores. When banks seized property of Zoom Developers to recover the amount – they recovered Rs130 crores only. Where is the rest of the money?

Zoom Developers, for this fraud, tried to confuse the banks. They grabbed the loan amount from banks and transferred it to Zoom Realty projects. Zoom Realty, then, bought properties. More loans were taken by Zoom Developers, transferred it again, and property again was purchased by the Realty company. Now, the company is at liquidation level after fraud of Rs2600 crores.

Another name in construction is – Coastal Projects Limited – default fraud amount is 4000 crores. The company directors did fraud with 16 different banks. One company took the loan and amount was siphoned to other companies. These defaulters are known as Wilful Defaulters – person who wouldn’t pay back to the bank even if he has the ability to do so. These are people who took the loan to divert the money and commit fraud with bank.

Another name in the list is Deccan Chronicle – fraud allegation of Rs 8180 crores. They defrauded the banks by availing loans by projecting a false and rosy financial picture and fabricated advertising revenue. In case of a layman, if s/he misses out on a certain entry, the CA will enquire where the money went, and we have to explain. Small loan of ours can change our Cibil score, but companies can take new loans despite previous loans, and change balance sheet.

And, this is not about a person or a company – the whole system is corrupt. Imagine how many influential people must be involved when big company files returns or loan application. Did no one know about the scam?

Besides, who will compensate for the loss in these scams? Banks? Or You and I?

If, say 50 rupees service amount is charged to us by bank, then they can recover the NPA default amount of the last 8 years. Who even notices the debit of 50 rupees from our bank accounts – unless you go into details? After a bit of researching, we found that banks’ charges’ list is 58 pages long.

May be that is why, when RBI governor was asked in recent monetary policy meeting – how much Adani loan will impact banks?

He replied that big banks are used to “small issues”.

Adani has 70-80,000 crores outstanding only. So, this is a very small issue, isn’t it? (slow claps)

If Rs500 are charged on all of us, then this loan amount will be recovered – but how long can we tolerate bank robbers?

NPA is a big problem for banks. Good intention and proper auditing can solve the problem. But problems like this last longer and impact everyone – when low balance charge, other random charges will be levied. Money has to come from somewhere!

Most disappointing is the fact that small people like us are treated like beggars when we apply for bank loans. But big players can get away with not paying back thousand of crores.

[Images from different sources]

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