The latest news that SBI has waived off loans of over 1200 crore ₹, is nothing but scare tactic of anti-Modi media. These media houses are bent on creating panic and driving misinformation among the common mass who do not understand the gibberish of accountancy.
So has SBI really waived off these loans including that of Vijay Mallya ‘s Kingfisher?
No, not at all. Simple explanation: The news agencies are reporting that ‘SBI writes off’ the loans, presenting the news to the common public as if the loans are waived off. “Writing off” is an accounting procedure where the recovery procedure etcetera are not changed. (Read below for detailed technical approach). This is not even worth as news. But media houses are running the story, to misinform the people, as it is obvious people will take it in a wrong way.
Now going into intricate details, first we need to understand what write-offs actually are.
Writing off is an accounting procedure in banks which is induced when there is sufficient provision against an account (say, a defaulter), then Banks revise their overall balance sheet by transferring such defaulter accounts to a different balance sheet, specifically made for such items. A balance sheet of a bank reflects the real ongoing situation of a case, not foreseeable assets. And that’s why Banks have to write off loans. If they don’t do this procedure, it will be as if claiming to own an asset (loans are actually the assets of the bank) which doesn’t even exist.
Even after the defaulting accounts are written off to another sheet, various recovery procedures including all the recovery cases filed against the defaulter before the court stands as it is. Nothing is changed.
So does a write off mean the loan has been waived? Definitely not. Everything is as it was before. The media is PURPOSELY creating confusion by mentioning a simple bank procedure to mislead people into thinking government is using their money to help defaulters in this time of economic restructuring.