Nirmala Sitharaman instructs Rahul Gandhi for confusing as waiver

On Tuesday, Finance Minister Nirmala Sitharaman instructed Congress leader Rahul Gandhi on his false claims about “willful defaulters, bad debts and write-offs”, calling them an attempt to “brazenly deceive people. And sensationalize the facts.

Finance Minister Nirmala Sitharaman’s response to Rahul Gandhi came after Gandhi-scion claimed the BJP government had waived loans worth Rs 68,607 crore in the form of cancellations of the top 50 voluntary defaulters .

Earlier, Rahul Gandhi attacked the ruling BJP after the Reserve Bank of India published a list of 50 willful defaults accused of defrauding banks. Those 50 defaulters included the companies of fugitive diamond dealer Mehul Choksi and fugitive businessman Vijay Mallya.

“I asked a simple question in Parliament: give me the names of the 50 biggest bank crooks. The Minister of Finance refused to answer. Now RBI has put the names of Nirav Modi, Mehul Choksi and other BJP friends on the list. This is why they hid the truth from parliament, ”the congressman tweeted in Hindi accompanied by a video.

Responding to the Congress leader’s allegation, Finance Minister Nirmala Sitharaman, in a series of tweets, accused Rahul Gandhi of sensationalizing the facts by taking them out of context. Pointing out that between 2009-10 and 2013-14, planned commercial banks had written off 1,45,226 crore rupees, she joked: “I wish Gandhi had consulted former Prime Minister Manmohan Singh on the subject of this radiation”.

She said provisions are made for non-performing assets on a four-year provisioning cycle established by the RBI. “Once the full provision is made, the banks cancel the fully provided NPA, but continue to pursue collection against the borrower. No loans are canceled, ”she wrote.

Finance Minister Sitharaman said the voluntary defaults were the beneficiaries of “telephone banking” under the UPA regime and that the Modi government is suing them to recover the contributions.

Finance Minister Nirmala Sitharaman also referred to press reports citing former Reserve Bank of India (RBI) Governor Raghuram Rajan, who allegedly said a large number of bad debts came from the period. 2006-2008 and “too many loans were granted to well-connected developers. who have a history of defaulting on their loans ”.

Helpful to recall the words of Raghuram Rajan: “A large number of bad debts were created during the period 2006-2008… Too many loans have been made to well connected promoters who have a history of defaulting on their repayments. loans… Public sector bankers continued to fund developers even as private sector banks fared. The RBI could have raised more flags on the quality of loans… ”Raghuram Rajan (said)… From 2015 the government asked PSBs (public sector banks) to check all NPAs> 50 crore for voluntary default” Minister Sitharaman replied to Rahul Gandhi on Twitter.

The finance minister then explained how properties belonging to fugitives Nirav Modi, Mehul Choksi and Vijay Mallya were seized by the Modi government after defaulting on loans.

Sitharaman said real estate and movable property belonging to fugitive Nirav Modi valued at over Rs 2,387 crore was seized or seized, including foreign foreclosures of Rs 961.47 crore. of luxury goods belonging to Nirav Modi gave in for Rs 53.45 Crore. He is in prison in UK ”, said the Minister of Finance.

Citing the progress made in the Mehul Choski case, the Minister of Finance said that properties worth Rs 1,936.95 crore, including the foreign seizure of Rs 67.9 crore, were attacked by the government of the Union. The government also seized Rs 597.75 crore. She added: “Red notice issued. Extradition request sent to Antigua. The hearing for the declaration of Mehul Choksi as a fugitive delinquent is underway ”.

Regarding the voluntary default of Vijay Mallya, the Minister of Finance clarified that “the total value at the time of the seizure was Rs 8040 Crore and that of the seizure was Rs 1,693 Crore. The value of the shares at the time of foreclosure was Rs 1,693 Crore. Declared fugitive offender. At the request of the Indian government for extradition, the High Court of the United Kingdom also ruled on the extradition. “

Sitharaman said it was the government led by Prime Minister Narendra Modi that was pursuing these deliberate failings.

“9,967 recovery lawsuits, 3,515 FIR, invoking the Fugitive Amendment Act in cases are pending. Total value of foreclosure and foreclosures in the cases of Nirav Modi, Mehul Choksi and Vijay Mallya: Rs 18,332.7 crore, ”she said.

“The bank details of the total amount of the current financing and of the technically / prudentially amortized amount, concerning the fifty main deliberate defaults have been provided as an annex to the answer to the starred question Lok Sabha * 305 from Rahul Gandhi on 16.3.2020”, the FM wrote.

Sitharaman also mentioned that a list of “borrowers reported as deliberate defaulting by public sector banks according to CRILIC reports as of September 30, 2019 (for borrowers with exposure of Rs 5 crore and above, global operations) has been provided” , November 18, 2019, in Lok Sabha.

The finance minister said Congress and Gandhi should ask themselves why they fail to play a constructive role in cleaning up the system. “Neither in power nor in opposition, Congress has shown any commitment or inclination to end corruption and cronyism,” Sitharaman added.

Congress’ claims on “canceled” loans

Shortly after reports emerged that the government had canceled some loans, congressional leaders attempted to mislead people by passing facts between cancellations and waivers, indicating that the loan granted to defaulters volunteers is completely canceled.

In effect, “write-off” is a balance sheet cleaning process undertaken by banks to describe the actual state of the bank’s assets and liabilities. Write-offs are not loan waivers as the Congress party and its ecosystem claim.

Banks typically write off loans (an asset for the bank) made to borrowers, which have now shown signs of weakness. If the banks fail to write off these loans, it is considered a high quality asset and the return on assets should be classified as income for the bank. However, the quality of a defaulted loan has deteriorated for some time, which has the effect of giving a bad image of the real assets of the bank.

Second, if a loan is not written off and is maintained as a healthy asset at a time when it is in fact a non-performing asset (NPL), banks can continue to recognize interest income on the loan. loan, on the basis of accrual accounting.

However, there are two impacts if the bank continues to do so. First, the bank artificially increases its income by recording interest on an accrual basis, which income is questionable because the loan is in fact an NPA.

Second, the bank must pay taxes on the interest income received. With the increase in bad loans, it is bad for the business of banks as it increases the liabilities of banks through unnecessary tax payments. Therefore, scheduled commercial banks regularly cancel loans for efficient accounting.

Once a loan is “written off,” the recognition of income on it is based on actual receipt of income, not accrual accounting, banks continue to charge interest on these loans and count as revenue only when received.

Write-offs are a purely technical accounting entry. Loans that cannot be repaid by the borrower in the ordinary course of business are written off. Even when these loans are written off, various collection proceedings such as debt collection lawsuits filed with the Debt Collection Tribunal and actions brought under SARFAESI law continue. Therefore, canceling a loan is not simply a “waiver”.

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