Here Is The Truth About Write Off And Waive Off, Which Government Haters Should Learn

1:54 pm 17 Nov, 2016


On November 16 a pernicious piece of news gained traction on social media. It spoke of how India’s largest bank, the State Bank of India (SBI), ‘assisted’ around 80 per cent loan defaulters by ‘writing-off’ their bad debts. Yes, the bank has indeed written off around Rs.7000 crores as bad debts.

The DNA report states:

While 63 accounts in the list have been fully written off, 31 have been partially written off and six have been shown as non-performing assets (NPAs).

Now, loans given to Vijay Mallya’s Kingfisher Airlines, which heads the wilful defaulters’ list with outstanding dues of almost Rs 1,201 crore, and 62 others will not be shown in the bank’s balance sheet.

The problem with the report is that in its attempt to sound sensational they used words that gave a very impression.

But the report was quickly lapped up by Modi baiters and Government critics in the media and, obviously, the Opposition. (This brilliant report exposes them and explains the entire episode.)

Many of them tweeted the story with their own criticism of the government.

Of course, it was, in their eyes, a golden opportunity to point fingers at the government which had not been giving them any reason to do so for a while.

But that itching to criticise the government made them forget the basics of economics itself.

 


The truth is that write offs are necessary for smooth and transparent operations of a bank. Since loans are assets, not mentioning that a particular asset has turned worthless or bad is tantamount to lying to the customer. So the banks often write off bad debts in their books of accounts.

But this does not mean that the loan given to a defaulter (this is why those failing to pay their loans are called defaulters) is not being pursued. Banks do everything in their power to get that loan back.

This is way different from waive off, but some journalists and the Opposition simply chose to misinform the people.

Economist Sanjeev Sanyal cleared the confusion of the people and destroyed the misinformation being spread in two tweets.

 

He also shared a post that offered a quick look at what write offs actually mean:

 


And some Twitter users lashed out at journalists:

 

But this confusion made one Twitter user rightly wonder whether the people should be taught basic economics:

 

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