BJP, Congress blame each other for protecting wilful defaulters
Top leaders in the BJP camp contended that the central government did not waive loans of wilful defaulters, while the Congress stuck to its guns and alleged that the government’s handling of the issue benefited economic fugitives such as Vijay Mallya, Nirav Modi and Mehul Choksi.Updated: Apr 30, 2020 09:10 IST
The government and the opposition Congress sparred over technicalities of dealing with India’s bad loan mess and economic offenders on Wednesday.
Top leaders in the BJP camp contended that the central government did not waive loans of wilful defaulters, while the Congress stuck to its guns and alleged that the government’s handling of the issue benefited economic fugitives such as Vijay Mallya, Nirav Modi and Mehul Choksi.
Information and broadcasting minister Prakash Javadekar said former Congress president Rahul Gandhi, who has sought to corner the government over the issue, should take economics lessons from his party colleague and former finance minister P Chidambaram.
“The Narendra Modi government has not waived off any loan (as alleged by the Congress). Write-off (what has been done) is a normal accounting process. It doesn’t stop recovery or action against defaults,” Javadekar said.
According to a finance ministry official who did not want to be named, such write-offs are a “technical necessity to keep banks’ books in order”. “It should not be anyway construed that the government has waived these loans. In fact, legal actions have been initiated against all the wilful defaulters,” this person added.
But veteran Congress leader Chidambaram wondered why the government wrote off loans of embattled businessmen Nirav Modi, Mehul Choksi and Vijay Mallya, who are fugitive economic offenders.
“You can technically write off the loan…One is not denying that there is such a rule…But why do you apply that rule to wilful defaulters who have fled India…that is the question,” he told reporters.
Chidambaram said he asked the government in Parliament to divide non-performing assets, or NPAs, based on three periods — given before 2004 in the Atal Bihari Vajpayee government, between 2004 and 2014 (in the Congress rule) and after 2014 (in the present government). He said he did not get any answer.
The controversy erupted on Tuesday after the Congress party alleged that the Centre waived loans worth ~68,607 crore of 50 top defaulters, including Nirav Modi, Mehul Choksi and Vijay Mallya. Citing a right to information (RTI) reply from the Reserve Bank of India (RBI), the Congress said the National Democratic Alliance (NDA) government in power waived loans worth ~6.66 lakh crore after coming to power in 2014 till September last year.
Explaining the difference between writing off and waiving a loan, Pavan Kumar Vijay, the founder of legal and corporate advisory firm Corporate Professionals Group, said: “Waiving is like a loan amnesty where a borrower has no liability against the loan. Write-off is an accounting procedure in case of a bad loan where a lender (bank) takes a hit only in its book but the liability of the borrower continues.”
A loan account is declared NPA if a borrower is unable to service the loan for over 90 days, Vijay said. “In that case, the lender has to make a provision in its book for accounting purpose as per RBI IRAC (Income Recognition and Asset Classification) Guidelines. As per RBI, in case of insolvency the minimum write-off is 50%. But, the liability of borrower or the defaulter continues in full,” he said.
Defending her government, Union finance minister Nirmala Sitharaman took to Twitter late on Tuesday, detailing the action taken against Nirav Modi, Mehul Choksi and Vijay Mallya. She too argued that no loan was waived.
Nirav Modi and his uncle Mehul Choksi are facing legal action for a ~13,500 crore Punjab National Bank (PNB) fraud. Vijay Mallya, who is facing extradition proceedings in London, defaulted on loans worth ~9,000 crore and fled India in March 2016. Modi is too is facing extradition proceedings in London.
Sitharaman said the government attached or seized properties worth ~18,332.70 crore in cases involving the three fugitive economic offenders. The government is pursuing wilful defaulters, and has filed 9,967 recovery suits and 3,515 first-information reports (FIRs) against such offenders, she added in a series of tweets.
Sitharaman said the Congress “attempted to mislead people in a brazen manner”, adding that it’s typical of the party that resorts “to sensationalising facts by taking them out of context”.
“@INCIndia and Shri. @RahulGandhi should introspect why they fail to play a constructive role in cleaning up the system. Neither while in power, nor while in the opposition has the @INCIndia shown any commitment or inclination to stop corruption & cronyism,” Sitharaman said.
She said commercial banks wrote off ~145,226 crore between 2009-10 and 2013-14, when the Congress-ruled United Progressive Alliance (UPA) government was in power. “Wished Shri. @RahulGandhi consulted Dr. Manmohan Singh (who was then the prime minister) on what this writing-off was about,” she said.
Referring to media reports and quoting former RBI governor Raghuram Rajan, she said a large number of bad loans originated in the 2006-2008 period in the Congress rule, and “too many loans were made to well-connected promoters who have a history of defaulting on their loans...”
Her response triggered a series of tweets by Congress leader Randeep Singh Surjewala. He asked whether the RTI reply from RBI to activist Saket Gokhale stated the facts, and questioned why the government was writing off “bank loans of absconders and frauds”.
“And @nsitharaman ji, Cleaning the Banks of people’s money by writing off loans of absconders & fraudsters is not called ‘cleaning the system’. ... It’s called weakening the entire Bank architecture fiscally & imprudently, if not maliciously,” Surjewala said.