On Thursday, Gandhi-scion Rahul Gandhi, who is enjoying his vacation in Milan, Italy, took to Twitter to put out misleading information on the alleged ‘waiving-off’ loans of industrialists by the Modi government.
Rahul Gandhi, interestingly, coming up with some magical numbers of Rs 2,37,206 crore, claiming that the Modi government forgave some industrialists by ‘waiving-off’ their loans. According to Rahul Gandhi, the huge amount, which according to him was ‘waive-off’ by the government, could have been provided for 11 crore families in the difficult time of COVID, each with Rs 20,000.
However, the claims made by Rahul Gandhi that the Modi government has ‘waived-off’ are far from the truth. As usual, Rahul Gandhi fails to comprehend the micro-economic technicalities and continues to peddle information about the alleged waiving-off of lakhs of crores of loans of industrialists in the country.
Perhaps, Rahul Gandhi does not understand the difference between a loan ‘write-off’ and a loan ‘waive-off’. There is a stark difference between restructuring a loan by ‘writing it’ off and completely ‘waiving-off’ of a loan given. Rahul Gandhi suggests that the loans that have been granted over last a few years, including some of the loans that were provisioned during the UPA era, are being ‘waived-off’ by the current government.
In the financial year 2019-2020, scheduled commercial banks, both private and public sector banks, in an effort to restructure the stressed assets, have reportedly written-off Rs 2,37,206 crores of loans. However, there is no credible source to suggest that loans worth that particular amount have been ‘written-off’.
Most importantly, as claimed by Rahul Gandhi, it is not an easy process for ‘waiving-off’ loans of industrialists without any credible rationale behind it. It is in fact an extremely lengthy process to either ‘waive-off’ loans or ‘liquidate’ the assets of the debtor in case if he fails to repay the loan.
Lets understand the technical difference between a loan ‘write-off’ and ‘waive-off’:
The ‘write-off’ is a process of balance sheet cleaning up exercise undertaken by banks to depict the real status of the bank’s assets and liabilities. The write-offs are not loan waivers as claimed by Rahul Gandhi. The banks usually write off loans (an asset to the bank) given to borrowers, which have now shown signs of weakness.
If banks fail to write-off these loans, it is reflected as a high-quality asset and the returns-on-assets should be classified as an income to the bank. However, the quality of a defaulted loan has deteriorated for some time now, which results in giving the wrong picture of the true assets of the bank.
Secondly, if a loan is not written-off and is continued as a healthy asset at a time when it actually is a Non-Performing Asset (NPA), then banks can continue to book interest income on the loan, on the accrual basis of accounting.
Write-offs are a purely technical, accounting entry. Loans, which may not be repaid by the borrower in the normal course of business are written off. Even when these loans are written off, various recovery procedures like recovery suits filed before the Debt Recovery Tribunal and action initiated under SARFAESI Act continue. Hence, the writing-off a loan is not simply a ‘waive-off’.
In addition to these differences, not all the loans that are being restructured by ‘writing-off’ are not provisioned during the current regime this year. The scheduled commercial banks have in the past, also in the current fiscal, may have written-off loans that are given by the banks in the UPA era. Loans writing-off is a normal banking operation, that is continuously undertaken every fiscal year by the banks to clean their balance sheet for accounting tax-related issues.
Contrary to the claims of Rahul Gandhi, no loans worth Rs 2,37,206 crore given to the industrialists are being ‘waived-off’.
Rahul Gandhi’s repeated lies about loan waiver to industrialists
This is not the first time that Rahul Gandhi has been spreading same lies by reiterating that Modi government has waived lakhs of crore of loans of few big industrialists. In his speech in July 2019, Rahul Gandhi had claimed that in the last 5 years the BJP government gave 4.3 lakh crore tax concessions and waived off 5.5 lakh crore tax for rich businessmen. He called out Modi government’s “shameful double standards”.
Many times in the past, Rahul Gandhi has repeated his lies, but interestingly, it has always been with a twist. Every time Rahul reiterates his lies, he keeps changing the amount. According to the Congress president, Modi government has waived loans of 5.50 lakh crore / 3.50 lakh crore / 3.00 lakh crore / 2.50 lakh crore / 1.50 lakh crore / 1.40 lakh crore / 1.30 lakh crore / 1.10 lakh crore owed by richest industrialists.
In November 2016, Rahul Gandhi spread lies and claimed that the Modi government had then waived off loans worth Rs 1.1 lakh crores of big industrialists. During campaigning for Gujarat assembly polls in 2017, Rahul Gandhi repeated the same trite, He inexplicably increased this figure by 20,000 Crores to Rs 1.3 lakh crores. In Karnataka, he went a step ahead and conjured up another grand figure- Rs 2.5 Lakh crores that were waived-off.
However, unfortunately, every time Rahul Gandhi makes such incorrect claims, he fails to understand the difference between ‘waiving off’ and ‘writing off’ of loans.