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The CBI is looking into bad debt write-offs by some of the banks and financial institutions involved in the kickbacks-for-loan rackets it busted last week. Two of them — Punjab National Bank (PNB) and Bank of India — have written off almost Rs 400 crore in the first three months of this fiscal (April-June 2010).

The agency is looking at whether the one-time settlements these government banks entered into with borrowers in the recent past were meant to pre-empt investigation into allegations of corruption. Together, all public sector banks (PSBs) have written off almost Rs 26,000 crore in bad debts in the last three years.

The CBI had on Wednesday raided offices of banks and insurance companies and arrested the CEO of LIC Housing Finance besides seven other senior officials of several banks and brokerage houses. The banks charged for irregularities included Bank of India, Central Bank of India and PNB.

A majority of the bad debt write-offs include defaults on loans extended to the real estate sector. According to the finance ministry, while PNB wrote off Rs 292 crore in the first three months of this fiscal, the highest by any PSB, Bank of India wrote off Rs 87 crore. The other major write-offs were done by State Bank of India (Rs 182 crore), Bank of Baroda (Rs 156 crore) and Corporation Bank (Rs 100 crore) in the April-June 2010 period.

The total bad debt write-offs by PSBs in 2009-10 were to the tune of Rs 11,000 crore; Rs 7,200 crore in the previous year and Rs 8,000 crore in 2007-08.

After CBI busted the racket, finance minister Pranab Mukherjee held a meeting on Thursday with senior officials of the banking division of his ministry to review the assets quality of various PSBs and financial institutions.

Mukherjee directed the PSBs to carry out an immediate evaluation of the asset quality (NPAs), documentation and compliance of mandatory banking guidelines. He stressed strengthening NPA monitoring and management.

With irregularities in the ongoing probe into the kickbacks-for-loan scam pegged at over Rs 1,000 crore, CBI is set to scan all write-offs and big loans extended by these banks, especially to the real estate sector.

What is worrying the government more is the fact that RBI has no information on the current status of defaulters on housing and vehicle loans extended by banks. While there was Rs 1.73 lakh crore housing loan outstanding as on March 2010, vehicle loans outstanding amounted to around Rs 20,000 crore.

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June 2024