NEW DELHI: A wide divide between the agriculture and corporate sector has surfaced in public sector banks’ response, with ‘write-off’ of loans or ‘restructuring’ loans for the latter being easier than the former.A government data shows that public sector banks restructured loans worth Rs 6,09,661 crore in last three years (2014-15, 2015-16 and 2016-17) meant for the industry sector. In the agriculture sector, the restructuring of loan was done for Rs 38,646 crore, 15 times lesser than for the corporate sector.
In banking parlance, restructuring of loans is done when the borrower faces financial stress and cannot repay loans. In that condition, it asks for relaxation of original terms and conditions. In such cases, banks ease certain terms like reduction of interest rates, moratorium on interest repayment and so on.
During 2014-15, restructuring of loans worth Rs 2,95,065 crore was done in the industry sector by public sector banks. The corresponding amounts for 2015-16 and 2016-17 were Rs 1,78,602 crore and Rs 1,35,994.On the other side, the amount of loan in agriculture sector and allied activities for restructuring in 2014-15, 2015-16 and 2016-17 were Rs 17,771 crore, Rs 11,808 crore and Rs 9,067 crore respectively.
Similarly, in the ‘write-off’ of loans, the industry or corporate sector is seven times ahead of agriculture.
Reduction in NPA due to write-off in the agriculture and allied activities was Rs 7,091 crore; the corresponding amount in the industry sector in the same period was Rs 48,435 crore.Sources from the banking sector say public sector banks generally write off of bad loans of bigger amounts.
A bank official said that declassifying a loan as an ‘asset’ in balance-sheets is termed as a write-off. It does not mean that the bank will not try to recover money—they might try to continue to recover the money themselves or sell the loan to a recovery company. By a write-off of loan, banks get a fair picture of assets that are making money through interests, and they also get a tax break on losses incurred.
