Banks wrote off Rs 1 lakh cr in 13 years: Chakrabarty

He said over 95% of such write-offs have been observed in the case of big accounts

Press Trust of India  |  <news:geo_locations>New Delhi   Last Updated at 00:45 IST

Reserve Bank of India (RBI) Deputy Governor K C Chakrabarty said banks had written off Rs 1 lakh crore in the past 13 years and criticised the lenders because as much as 95 per cent of these write-offs were for large borrowers.

“During the past 13 years what we see is that the banking system as a whole has written off more than Rs 1 lakh crore in advances,” Chakrabarty, the senior-most of the deputy governors  at RBI, said.He said over 95 per cent of such write-offs have been observed in the case of big accounts and expressed anguish that public discourse focuses only on the government’s agricultural  debt waiver scheme of 2008.“We only talk about the debt waiver of the agricultural borrowers, we don’t say big players and of this (Rs 1 lakh crore) 95 per cent are all big borrowers and it has been written off,” he said.

The government had announced a waiver of over Rs 60,000 crore in advances to the farm sector as a one-time measure in the Budget of 2008 following stress in the rural sector.
In his over hour-long interaction with the bankers, Chakrabarty used hard data to support his observation and blamed complacency on credit appraisal and credit management for the present situation of high non-performing assets and high incidence of loan recasts.
Chakrabarty, who joined RBI after a long career as a commercial banker, was particularly critical of the system of a “technical write-off” by the lenders, saying he does not understand the system.
In his speech, he also asked the bankers to be economical with restructuring, if not abolish the system in full.

RBI talks about making borrowing expensive for defaulters


In a discussion paper on framework for revitalising distressed assets, the RBI has proposed several measures including making future borrowing expensive for defaulters and setting up a central repository for collectinginformation on large credits

Reserve Bank of India (RBI) has released a discussion paper on framework for revitalising distressed assets or non-performing assets (NPAs). The discussion paper outlines a corrective action plan that will incentivise early identification of problem cases, timely restructuring of accounts which are considered to be viable, and taking prompt steps by banks for recovery or sale of unviable accounts. The paper also talks about making future borrowing more expensive for borrowers who do not cooperate with lenders.


Under the proposals, RBI will set up a Central Repository of Information on Large Credits (CRILC) to collect, store, and disseminate credit data to lenders. Before a loan account turns into an NPA, banks should identify incipient stress in the account by creating a new sub-asset category, special mention accounts (SMA) in line with instructions issued by RBI.


“Banks will have to furnish credit information to CRILC on all their borrowers having aggregate fund-based and non-fund based exposure of Rs5 crore and above. While all scheduled commercial banks will mandatorily contribute their credit information on their borrowers/ customers as above, systemically important non-banking financial companies (NBFC-SI) will also be asked to furnish such information. In addition, banks will have to furnish details of all current accounts of their customers with outstanding balance (debit or credit) of Rs1 crore and above,” the central bank said.


Banks will be required to report, among others, the SMA status of the borrower to the CRILC. Reporting of an account as SMA-2 by one or more lending banks/ NBFC-SIs will trigger the mandatory formation of a Joint Lenders’ Forum (JLF) and formulation of Corrective Action Plan (CAP).


RBI said, “With a view to limiting the number of JLFs to be formed, it is proposed that JLF formation would be made mandatory for distressed corporate borrowers, engaged in any type of activity, with aggregate fund based and non-fund based exposure of Rs100 crore and above. Lenders, however, have the option of formation of JLFs even when the aggregate fund-based and non-fund based exposures in an account are less than Rs100 crore.”


To resolve the stress in the account, the JLF may explore various options like rectification, restructuring and recovery. “Wilful defaulters will normally not be eligible for restructuring. However, the JLF may review the reasons for classification of the borroweras a wilful defaulter and satisfy itself that the borrower is in a position to rectify the wilful default. The decision to restructure such cases should however also have the approval of the board/s of individual bank/s within the JLF who have classified the borrower as wilful defaulter,” RBI said.


Here are the main proposals in the paper titled, ‘Early Recognition of Financial Distress, Prompt Steps for Resolution and Fair Recovery for Lenders: Framework for Revitalising Distressed Assets in the Economy’…


  • • Early formation of a lenders’ committee with timelines to agree to a plan for resolution.
  • • Incentives for lenders to agree collectively and quickly to a plan – better regulatory treatment of stressed assets if a resolution plan is underway, accelerated provisioning if no agreement can be reached.
  • • Improvement in current restructuring process: Independent evaluation of large value restructurings mandated, with a focus on viable plans and a fair sharing of losses (and future possible upside) between promoters and creditors.
  • • More expensive future borrowing for borrowers who do not co-operate with lenders in resolution.
  • • More liberal regulatory treatment of asset sales.
  • • Lenders can spread loss on sale over two years provided loss is fully disclosed.
  • • Takeout financing/refinancing possible over a longer period and will not be construed as restructuring.
  • • Leveraged buyouts will be allowed for specialised entities for acquisition of ‘stressed companies’.


  • • Steps to enable better functioning of Asset Reconstruction Companies mooted.


  • • Sector-specific Companies/Private equity firms encouraged to play active role in stressed assets market.


Going forward, RBI said, “While some regulatory and governmental measures may be required to address the factors that are leading to deteriorating asset quality, there is an equal need for proper credit discipline among lenders.”


Comments on the Discussion Paper may be sent to the Principal Chief General Manager, Reserve Bank of India, Department of Banking Operations and Development, Central Office, 12th Floor, Central Office Building, Shahid Bhagat Singh Marg, Mumbai-400 001 or emailed to by 1 January 2014.