If Vijay Mallaya Can, Why Can't I: 'Safai' Worker Seeks Loan Waive Off

[drone]

SBI has struggled to recover Rs. 7,000 crores loaned to Vijay Mallya-promoted Kingfisher Airlines

Mumbai: Amid the controversy over public sector lender SBI reportedly writing off loans worth Rs. 7,000 crore, including that of Vijay Mallya-promoted Kingfisher Airlines, a sanitation worker in Nashik has written to the SBI, seeking a 'similar' waiver of his Rs. 1.5 lakh loan.

Bhaurao Sonawane, a safai worker with the Tryambakeshawar municipal council in Maharashtra's Nashik district, said he had written to the SBI, seeking waiver of his loan, "in the same manner in which the bank waived off Mallya's loan".

"I have written a letter to the bank, congratulating it for the 'good decision' to waive of Mallya's loan. I requested SBI to waive off my loan as well," Mr Sonawane said.

"I took this loan to meet expenses on my son's illness," he said, adding that the bank manager is yet to respond to the letter.

Mr Sonawane's demand comes against the backdrop of Finance minister Arun Jaitley asking opposition members in the Rajya Sabha not to go by the literal meaning of write-off.

"So there is a little bit of malapropism involved in this. Don't go by literal meaning write-off. Write-off does not mean loan waiver. Loan still remains. You still continue to pursue," Mr Jaitley had said, during a debate in the House on the government's demonetisation action.

Mr Jaitley was replying to CPI(M) leader Sitaram Yechury who referred to a newspaper report which said SBI wrote off loans of wilful defaulters including Rs. 1,200 crore of Kingfisher Airlines.

I was thinking may be my i will also approach my home branch and ask for a waiver ..

Source : http://www.ndtv.com
Credit to original author

 

[Serious Sam]

SBI has struggled to recover Rs. 7,000 crores loaned to Vijay Mallya-promoted Kingfisher Airlines

Mumbai: Amid the controversy over public sector lender SBI reportedly writing off loans worth Rs. 7,000 crore, including that of Vijay Mallya-promoted Kingfisher Airlines, a sanitation worker in Nashik has written to the SBI, seeking a 'similar' waiver of his Rs. 1.5 lakh loan.

Bhaurao Sonawane, a safai worker with the Tryambakeshawar municipal council in Maharashtra's Nashik district, said he had written to the SBI, seeking waiver of his loan, "in the same manner in which the bank waived off Mallya's loan".

"I have written a letter to the bank, congratulating it for the 'good decision' to waive of Mallya's loan. I requested SBI to waive off my loan as well," Mr Sonawane said.

"I took this loan to meet expenses on my son's illness," he said, adding that the bank manager is yet to respond to the letter.

Mr Sonawane's demand comes against the backdrop of Finance minister Arun Jaitley asking opposition members in the Rajya Sabha not to go by the literal meaning of write-off.

"So there is a little bit of malapropism involved in this. Don't go by literal meaning write-off. Write-off does not mean loan waiver. Loan still remains. You still continue to pursue," Mr Jaitley had said, during a debate in the House on the government's demonetisation action.

Mr Jaitley was replying to CPI(M) leader Sitaram Yechury who referred to a newspaper report which said SBI wrote off loans of wilful defaulters including Rs. 1,200 crore of Kingfisher Airlines.

I was thinking may be my i will also approach my home branch and ask for a waiver ..

Source : http://www.ndtv.com
Credit to original author

so what does write-off means if it doesn't mean loan waiver ??

 

[Lord Nemesis]

Technically, a write off means that the company has incurred a loss that is no longer recoverable. For example, MS wrote off the 5 billion it invested in acquiring Nokia which means it made a bad investment and now the money is gone.

In case of banks, writing off a loan is virtually equivalent to waiving off the loan. Once the loan is written off in the records, there is no necessity or incentive to recover it. Often, the borrower will even be able to get further loans though apparently its been made more difficult now. Bank write offs can in most cases be considered a scam since smaller loans are never written off. It is only the big scale loans provided under dubious conditions that are written off. For example, Mallya's loans were issued with random unrelated people has guarantee. The loans are facilitated through political pressures and mal-practices at the banks. If the banks are properly investigated, there can be many heads that need to roll.

So the banks just write off the loans and in case of nationalized banks like SBI the money of us poor tax paying fools is used to steady the banks balance sheets.

 

[Serious Sam]

Technically, a write off means that the company has incurred a loss that is no longer recoverable. For example, MS wrote off the 5 billion it invested in acquiring Nokia which means it made a bad investment and now the money is gone.

In case of banks, writing off a loan is virtually equivalent to waiving off the loan. Once the loan is written off in the records, there is no necessity or incentive to recover it. Often, the borrower will even be able to get further loans though apparently its been made more difficult now. Bank write offs can in most cases be considered a scam since smaller loans are never written off. It is only the big scale loans provided under dubious conditions that are written off. For example, Mallya's loans were issued with random unrelated people has guarantee. The loans are facilitated through political pressures and mal-practices at the banks. If the banks are properly investigated, there can be many heads that need to roll.

So the banks just write off the loans and in case of nationalized banks like SBI the money of us poor tax paying fools is used to steady the banks balance sheets.

why isn't it recoverable i mean he still has some money i guess otherwise how is he living abroad without a penny ......

 

[Lord Nemesis]

Not recoverable because the govt has no will or desire to recover from him. The govt refuses to go beyond what is required to keep up appearances before the court and media. So, the only thing bank will do is to cover this own asses.

People like Mallya can be in cahoots with both Congress and BJP because corruption does not recognize such boundaries. Who knows how much black money dealing he as with politicians of both parties. Mallya was under supervision and there were look out notices against him. He used political help to get rid of those a few months before he left. Further more, its very suspicious that one of the last persons he would meet before leaving the country would be the the Finance Minister and then he leaves the country with 11 heavy pieces of luggage without a problem. Who knows what he carried in those bags and what belongs to him and what belongs to his govt friends. A few months down the line we have this demonetization which when he left would be early stages of inception with the Finance minister.

 

[Serious Sam]

Not recoverable because the govt has no will or desire to recover from him. The govt refuses to go beyond what is required to keep up appearances before the court and media. So, the only thing bank will do is to cover this own asses.

People like Mallya can be in cahoots with both Congress and BJP because corruption does not recognize such boundaries. Who knows how much black money dealing he as with politicians of both parties. Mallya was under supervision and there were look out notices against him. He used political help to get rid of those a few months before he left. Further more, its very suspicious that one of the last persons he would meet before leaving the country would be the the Finance Minister and then he leaves the country with 11 heavy pieces of luggage without a problem. Who knows what he carried in those bags and what belongs to him and what belongs to his govt friends. A few months down the line we have this demonetization which when he left would be early stages of inception with the Finance minister.

*******************************
[Deleted by MOD]

Atleast vijay mallegaya can be given the tittle of "biggest entrepreneur of india" he tried and succeeded in doing something no indian could think of .....
He is the true Nationalist
Indians should be proud of him !!

 

[6pack]

Ever noticed how these large scale loan defaulters or very rich people under investigation run of to Great Britain? Mallya, some bloke in BCCI, lots of Pakistani ministers - all of these buy homes and sit nice and tight without having to worry about being deported.

 

[mav2000]

Sadly this seems a case of the blind leading the blind. I would suggest some of you to take the time to read what it actually means before shooting your mouth off.

Not recoverable because the govt has no will or desire to recover from him. The govt refuses to go beyond what is required to keep up appearances before the court and media. So, the only thing bank will do is to cover this own asses.

People like Mallya can be in cahoots with both Congress and BJP because corruption does not recognize such boundaries. Who knows how much black money dealing he as with politicians of both parties. Mallya was under supervision and there were look out notices against him. He used political help to get rid of those a few months before he left. Further more, its very suspicious that one of the last persons he would meet before leaving the country would be the the Finance Minister and then he leaves the country with 11 heavy pieces of luggage without a problem. Who knows what he carried in those bags and what belongs to him and what belongs to his govt friends. A few months down the line we have this demonetization which when he left would be early stages of inception with the Finance minister.

 

[Lord Nemesis]

Then, enlighten us as to what it means.

Once a loan is written off, it is no longer a question of whether it can still be recovered because there is no further necessity to pursue recovery by spending time and money when its already written off as a loss that is going to be passed on to the govt/share holders.

Secondly, If the govt were serious about getting Mallya back and taking him to task, there were options available and the UK govt even offered to help, but our govt simply does not wish to do anything about it. He is not just guilty of a loan default, but also of large scale identify theft/submission of fraudulent documents.

 

[mav2000]

@Lord Nemesis, this is only an accounting entry made as per the current rules and regulations as laid down by the RBI and done as per current accounting standards. When you put these loans into the AUC account, you can free up the provision that you have made for these loans. In no way is the borrower going to get away with it and the bank will continue to follow up on the recovery process.

The entry is done so that the bank can then use the freed up capital for more constructive purposes.

Edit: In case they wanted to not follow up on collection of these loans, they would have probably done it quietly and not made any changes to the account status.

Hope this helps you understand what this means.

 

[blkrb0t]

How many loans that have been written off in the past have actually been recovered?

I think if we could dig up the history of such cases, we can know whether writing off such huge loans is really just an accounting standard or yet another way to let go of rich and influential loan defaulters.

 

[drone]

I f the high court orders to dig up and recover the loans that are not paid , that could account for atleast the deletion of poverty in india for a decade .

 

[kidrow]

Question for those who know about these things - Is an NPA same as a write-off?

I saw Yechury's speech live ("clearing the pond to get rid of the alligators") & in response to his allegation of a write-off, Jaitley said that the loan was merely converted to an NPA (a mere technicality, in his opinion), & so the Govt would continue to pursue it. Yechury's response was similar to how a few on this thread have responded - that whichever way you put it, there is very little likelihood of the loans actually being recovered.

Thanks.

 

[mav2000]

NPA, basically means non performing asset. A loan which has not been serviced for x no. Of months is put into this bucket. I think now it is 3 or 6 months of non service. In this case the bank has to make a provision on its balance sheet against such loans.
In this case, it's slightly different as this loan has been moved to a book where as per the bank chances of recovery are very low. But in the case of Mallya, the banks have already taken into custody about 9k crores of various assets. Now how much they are able to raise out of these assets will depend on the banks... They may have a fire sale and raise 5k crores or they may go for the longer route and raise a higher amount. But the main reason to move these loans into the AUC account is to reduce provisions.

 

[abhi1984]

Sorry to say this but TE seems to have more and more people posting stories without investigating it fully.

Lets forget Yechury and opposition vs Jaitley for a second. They are just dancing around the fire playing their role of government vs opposition.

First to clarify, there are three different terms which technically feel the same but are not - write down, write off and waive off.

Write downs normally happen when a company reduces the "fair value" of an asset. One of the hallmarks of this is an acquisition. A simplified example is: say company A has 100 rs worth in asset (cash + property) and company B has 50 rs worth asset. Now when the acquisition happens A feels B is worth 70 so it pays a rs 20 premium for B. So when the acquisition is completed the total asset of A becomes 100 + 50 = 150. But..the 20 is not an conventional item - cash or property. So a new asset entry is created called goodwill. So now the balance sheet becomes 150 + 20 in goodwill. Normally this meant to represent IP or other "intangible asset" of B.
Now when A realizes its mistake in paying the premium it will write down the goodwill ie make it 0 meaning in A's view B's worth is reduced to 50.

This was the case for Microsoft and Nokia.

Loans are normally considered to be an asset for the banks on the balance sheet. When it falls in delinquency ie not paid for sometime it becomes NPA and banks try to recoup their losses. When it becomes difficult for them to recoup the losses, it no longer make sense to continue to have them on the books. So they write it off and adjust their "taxable income" accordingly.

Now before one says "Aha, so they are doing something wrong here", the banking rules in India needs to be understood. Loans, specially huge corporate ones are a mess in India because of the exact drama which is going on now.

RBI for the most part doesn't allow changing terms of a loan ie a company cannot say - well, we took a very large loan at a high rate y for x years but now I am unable to pay. So can you please change it to say, y-2 rate for x years? or y rate for x + 5 years? or both y-2 for x+5 years?
And if it was possible can one even imagine the amount of drama thing like this would cause? A safai worker might ask for the same thing.

One time payments is also in the same boat which can be tainted with "government helping x company to pay huge 5k crore loan for 200 crore" one time payment.
Same goes for if they try to selloff the debt to a debt recovering agency and recoup losses for say 2 paise on a rupee ie 2% of the actual loan value. People will start to share stories of how 5k crore loan was "waived off" for 2% the value.

So what can they do? Well litigate the loan. There is a DRT or debt recovery tribunal which oversees this. But....the Indian courts being what they are, have to have a say in everything. They can and sometimes overturn the DRT's decision. This has emboldened the companies in India which normally fight tooth and nail any debt recollection efforts. Case in point Mallya's court case headed by SBI, which btw is not closed is it? And conveniently ignored when making the current accusation.

This all leads to an extended recovery time for a bank. All banks have to make provisions for bad loans and can give out only so much of loans. So if they keep having a NPA on books they cannot give out new loans. So next time some entrepreneur or a company or a person like you and me goes to them for a fresh loan they can say well we don't have capacity.

One has to understand that loans are an important function in a capital economy. Without a housing loan I am not going to buy that obscenely priced house and the builder is not going to pay his dues to partner companies, workers, banks etc further down the line a cement company is not going to be able to pay its dues.

Additionally, banks are normally mandated by government to give out at least x amount of loans a year. So in this situation (marta kya na karta), banks have to write off NPAs and make space to give out loans.

It is only recently that an initiative called S4A has been instituted. Banks can convert a part of the debt considered unsustainable to equity and sometimes play an active role in the company's management. But..the sustainable part has to be paid according to the schedule and payments cannot be changed. Banks are currently lobbying for the ability to change terms ie make the sustainable part payable in more years or less interest. This way at least they get something out of the loan and not write off amounts.

Now one can still talk about favoritism to a particular company. People disagree with me but that is to be expected is it not? Not to be cynical but expecting fairness in this world for everything is incredibly naive. This again goes back to my post on the open letter thing. In India, we don't seem to be appalled by some IIM/IIT graduates running to US forever and not paying their educational loans but seem concerned by corporations a lot. Yes the amounts are different but thievery is thievery. Unless we start thinking that stealing is bad altogether we are not really going to improve. One person who defaults on his education loan and gets away with it will open a company tomorrow and try to default on his company's loan.

Coming to waive off. It is a legality where the bank give up all legal rights on the loan and is never going to be recovered at all and loan value disappears into a black hole. Example farmer waive offs.

 

[kidrow]

@mav2000 @abhi1984 Thanks for your response. Helped clear up a lot of things.

 

[Lord Nemesis]

Microsoft wrote-off the Nokia deal It was not just a adjustment of value, it was a complete write off saying that the 5 billion + investment is completely lost

Writing off an asset is the same as claiming the asset no longer serves a purpose and has no future value. If an individual or business cannot recoup a debt, such as the receivable is no longer likely to be collected, or if an inventory item will not sell, those items can be taken off the books.

Old equipment can be written off even if it still has some potential functionality. For example, a company might upgrade its machines or purchase brand new computers. In these circumstances, the equipment being replaced can be written off and have its economic value listed at $0.00.

When a loan is written off, it is definitely not same as waiving of the loan for the borrower. The media and politicians may misconstrue it as a waiver, but its not. But on the other hand, what is the practical impact of the write-off? The bank considers this asset to be of no value which also makes it pointless to spend any further cost or effort towards it. You can justify spending 1 or 2 crore on an asset which yields 1200 crores in the long run, but when you declare that the asset is worthless in your books and that you incurred a loss on said asset, you will not be able to justify spending anymore on it.

What you said about banks having to keep provisions for bad loans is true and so is the fact that they cannot give new loans when they have an NPA on the books. So, they write off the loan, but who ultimately eats that loss? In case of private banks, its the customers and the share holders. In case of nationalized banks, its the govt which means that tax payers money is used to cover that loss and bring back the capacity of the bank so that the bank can lend money to the tax payers, and even worse lend more bad loans to people like Mallya who keep getting them with the help of their collisions with politicians and their influence. The banks themselves may also be responsible on their own.

 

[abhi1984]

No MS dint. A simple search to lookup what I said would have helped to ascertain that:
https://techcrunch.com/2015/07/08/m...its-nokia-acquisition-announces-7800-layoffs/
https://techcrunch.com/2015/04/28/lets-impair-that-goodwill/

The highlight being goodwill impairment. This again comes down to media reporting and your understanding of accounting which already has been pointed out and you took offense to it. So I don't want to get into a longer and longer post competition. But here's the gist of what I have explained above:
B had 50 rs of asset value ie their plants, property, cash and even IP is considered to be fairly valued at 50. So with depreciation year over year it might go down to say 40 over time. Because those things will have some value irrespective. But..the goodwill ie the premium paid 20 is not adjustable unless it is written down. Then again the value of 50 could also be impaired above the general rate of depreciation which becomes a write down "fair value". This again is not solely from Nokia or MS pov but in general. From the MS point of view it could mean 50 has become 20 and the 20 premium is gone so lets "write down" the investment to 40 from 70. What you are saying is basically they said Nokia is worthless and adds zero to our balance sheet which is not true at that moment because the IP, physical property etc of Nokia would still be worth something.

And I don't even get the point on "practical impact" citing a foreign example of a physical good being written off, which again btw happens through depreciation over time not a one shot unless in special circumstances. Do look up an example of finance "write off" and their implications (from investopedia which you seem to trust):
http://www.investopedia.com/ask/answers/070815/why-do-banks-write-bad-debt.asp

Highlight being:
When a nonperforming loan is written off, the lender receives a tax deduction from the loan value. Not only do banks get a deduction, but they are still allowed to pursue the debts and generate revenue from them. Another common option is for banks to sell off bad debts to third-party collection agencies.


As I said there are special considerations to banks in India. No one wants zero for 1k crore loan. They write off but fight the cases in DRT or courts, they are in a bind and loan defaulters are more and more emboldened. I can't be the only one digging so I would rather want people to look up loans being written off and being fought to recover parts of it. They have better tools in form of S4A now but implementation is still restricted.

 

[sharktale1212]

Ok so I looked up "do banks collect written off debts" in Google to see what happens:
https://www.google.co.in/search?q=d...safe=off&q=do+banks+collect+written+off+debts

Found couple of pages to name a few:
http://www.nolo.com/legal-encyclopedia/what-is-credit-card-debt-write-off.html
http://smallbusiness.chron.com/happens-bank-writes-off-bad-debt-58308.html
http://www.bankrate.com/finance/debt/debt-charged-off-still-pay.aspx

So I don't get why there seems to be an insistence on otherwise. Mallya has to pay unless it is waived off.

 

[ssslayer]

Amid the controversy over public sector lender SBI reportedly writing off loans worth Rs. 7,000 crore, including that of Vijay Mallya-promoted Kingfisher Airlines, a sanitation worker in Nashik has written to the SBI, seeking a 'similar' waiver of his Rs. 1.5 lakh loan.

******************************
Kingfisher airlines had a potential to earn crores of rupees, give employment to thousand of people, and raise competition in its industry (increasing the the standard of performance and bring the prices down).

Is this even comparable to someone's personal loan demands?

Is the public really this dumb?