Bankers have denied allegations that technical write-offs by banks are a “scam” as suggested by former Reserve Bank of India Deputy Governor K C Chakrabarty.
“Write-offs are done at the bank’s balance sheet level after it has been provided for. So, the process of recovery continues and the account remains alive, therefore I don’t think it is a scam,” said Arun Tiwari, chairman & managing director, Union Bank.
According to Reserve Bank of India guidelines, technical or prudential write-offs are the amount of non-performing loans that are outstanding in the books of the branches, but have been written off (fully or partially) at the head office level.
A public sector banker, who requested anonymity, said these write-offs are done as prudent measure and in accordance with the regulatory guidelines laid down and, therefore, cannot qualify as a “scam.”
Chakrabarty also added that banks usually don’t write off small ticket size loans.
“Some big loans, such as agriculture loans, are written off first at times because they will be provided for by the interest rate subvention route, which may not happen in case of small loans,” said the banker.