Plea In SC Against Writing-off NPAs And Waiving-Off Loans By Banks [Read Petition]

The Supreme Court has been moved in a PIL to restrain banks from Technical write-off of NPAs and from waiving off loans with a view to ensure fair usage of public funds which belong to the country's economy.

It has been contended that this practice of loan-waiving adversely affects the economy by increasing the fiscal deficit due to Technical writing-off of NPAs. "The technical write-off of Non-Performing Assets is like tampering and fabrication of Balance Sheet which will not give the true and fair picture of its financial condition. The Banks also get a percentage of around 7.5% to 8.5% of NPA as an allowable provision from their income which reduces their tax liability, which also directly indicates that NPAs are helping banks in reducing their taxes", the petition avers.

Further, it is advanced that political parties are offering Loan waiver schemes in their election manifesto to pursue their political motives. This offer to waive the loan is satisfied from the government exchequer gathered by taxation and not from their party funds, entailing a transfer from tax-payers to borrowers. In order to grab power by luring particular sections of the vote-bank, especially farmers, these political parties, by offering temporary incentives like loan-waiving, are spoiling the economy's the credit culture and are permanently making the farmer financially-weak and vulnerable.

The plea goes on to lament that despite the largest section of people in India being dependent on agriculture, the country lacks the perfect agriculture model- "It appears that the people sitting in power or the political parties who are trying to come in power never want

that the majority of Indian farmers comes out of poverty, due to their large percentage of share in elections. The small country of Netherlands, having a population of 1 Crore 75 Lakhs only, is presently a global giant in agriculture production...If we compare India with the Netherlands, the answer is the lack of a genuine intention to make farmers financially strong and independent. The agriculture sector requires a permanent resultant policy and not a temporary sweet poison named loan waiver which is affecting honest credit culture and credit discipline"

The PIL cites news reports stating that farm loan waivers won the Lok Sabha polls for the Congress in 2009; that according to former Deputy RBI Governor K C. Chakrabarty, Technical write-offs encourage non-transparency and wrongdoings; that as per RBI data for the Financial Year ending March 31, 2018, only two public-sector banks were in profit from a list of 21; that in April 2018, the CAG had questioned the role of RBI on the NPA crisis; and that farm loan waiver and corporate defaulters are two sides of the same coin.

It is argued that waivers create a moral hazard and affect repayments by future borrowers, and it accordingly prayed that-

(a) The banks be restrained from technical writing-off of NPAs so that the true and exact financial conditions of the banks cannot be camouflaged;

(b) The Banks should not be granted any allowable provision or other in the percentage of their NPAs which reduces their tax liabilities;

(c) The Centre and state governments should not be permitted to reduce or waive off loans;

(d) And political parties should not be permitted to offer loan-waiving incentives or any other monetary schemes in their election manifestos.

The petition would be heard on Monday by a bench headed by Justice S. A. Bobde.

Read the Petition Here