English हिन्दी
Connect with us

Latest business news

Amid fears over safety of bank deposits due to FRDI Bill, reports of corporate loan write offs

Published

9 years ago

on

Amid fears over safety of bank deposits due to FRDI Bill, reports of corporate loan write offs

If big corporate houses do not repay loans, will banks take over your money? It may seem ridiculous or outlandish, but there are fears that it may become a distinct possibility.

Amid fears over Financial Resolution and Deposit Insurance (FRDI) Bill, 2017 – expected to come up for passage in forthcoming winter session of Parliament – authorising take over of account holders’ control over their deposits in failing banks, came a report that banks have written off over a lakh of crores of loans.

The public sector banks, that account for 63 per cent of investments made by people, have written off Rs 55,356 crore worth of loans in the first six months of fiscal 2017-18, said a repport in The Indian Express, quoting data compiled by credit rating agency ICRA.

This, said the report, was done under banks’ attempt to clean up their balance sheets after a string of defaults by firms and promoters in the wake of the economic slowdown.

The write-off in the last six months was 54 per cent higher than the Rs 35,985 crore written off in the same period last year. Banks are reportedly struggling to resolve many cases of repayment of loans and recover money stuck with corporate defaulters through insolvency proceedings.

Figures obtained by The Indian Express from the RBI through the Right to Information (RTI) Act for the last decade show that banks had written off  Rs 2,28,253 crore in nine years — from fiscal 2007-08 to 2015-16.

While the RBI did not provide data for the subsequent period, the ICRA, responding to a questionnaire, said that write-offs amounted to Rs 1,32,659 crore in 2016-17 and the first six months of 2017-18, said the IE report.

This means the total write-off in the last ten years is now over Rs 3,60,000 crore, the report said.

Banks were engaged in a massive write-off of loans over the years and the figure hit a high of Rs 77,123 crore during the year ended March 2017, against Rs 57,585 crore in fiscal 2015-16. Ten years ago, in 2007-08, loans written off by banks were just Rs 8,019 crore, the RBI said in its reply to an RTI query.

Gross non-performing assets (GNPA) are likely to peak at Rs 8,80,000-Rs 9,00,000 crore (10.0-10.2 per cent) by the end of FY2018 as against NPAs of 9.5 per cent (Rs 765,000 crore) as on March 31, 2017, said the IE report quoting ICRA group head Karthik Srinivasan.

“A substantial portion of this write-off is, however, technical in nature. It is primarily intended at cleansing the balance sheet and achieving taxation efficiency. In ‘Technically Written Off’ accounts, loans are written off from the books at the Head Office, without foregoing the right to recovery. Further, write-offs are generally carried out against accumulated provisions made for such loans. Once recovered, the provisions made for those loans flow back into the profit and loss account of banks,” the RBI had said in an explanatory note.

M Narendra, former chairman and MD of Indian Overseas Bank, said, “The write-off is just a technical book entry. Banks are not losing anything. It doesn’t mean banks are giving up those assets. They will continue with various recovery methods.”

However, a former RBI official quoted in the IE report said, “Technical write-off creates non-transparency, destroys the credit risk management system and brings all types of wrongdoings into the system.”

“I have nothing against a write-off but it has to be done scarcely and within a policy, with all efforts taken to recover the money. Any asset which is backed up by tangible asset is never written off. Secondly, you must be subject to scrutiny for these write-offs. There must be a policy. You ask any bankers. They have written off Vijay Mallya’s loan. Then how are they going to recover that money? Use it very sparingly and do it where it’s essential. If there’s asset, why are you writing it off?” the official said.

Significantly, the write-offs come amid government’s efforts to enable a clean-up of balance sheets of banks.

It is in this context that a bill was approved by the government in June 2017 for helping resolve problems of failing banks. Details of the bill, Financial Resolution and Deposit Insurance (FRDI) Bill, 2017, that came out in the media have given rise to deep fears among bank depositors. The Bill, at present before a Select Committee of the Parliament, was opposed by Bank unions who issued a joint statement last month saying that the proposed law will open up public sector banks for liquidation or amalgamation, which could put the deposits of customers under severe risk.

The bill also provides for a bail-in option, which means depositors could lose control of their money which could be converted into securities such as shares in the bank in case the bank’s financial situation deteriorates.

The “bail-in” powers would be exercised by a body called Resolution Corporation, proposed to be set up in Bill, for saving a bank which is on the verge of collapse.

The ‘bail-in’ is method used for rescuing a financial institution on the brink of failure by making its creditors and depositors take a loss on their share holdings or deposits. A bail-in is the opposite of a ‘bail-out’, which involves the rescue of a financial institution by external parties, typically governments using taxpayers’ money.

Governments usually resort to bail-outs rather than bail-ins, “but in recent years after massive bail-outs some governments now require the investors and depositors in the bank to take a loss before taxpayers,” according to a report.

Section 52 of the FRDI Bill gives the Resolution Corporation powers to cancel a liability of a bank. ‘Liability’ of a bank is the money in a savings or fixed deposit account that the bank owes to its customer. This means that the RC can declare the bank doesn’t owe you any money. It can also modify or change the form of liability, meaning if you have deposited money for using it for something after 5 years, the bank may instead convert it into a deposit with a lock-in of 15 years without your consent. The Bill also has a provision that allows the RC to exempt the failing bank for fulfilling its obligations under a contract or an agreement.

Seeking to allay fears, Finance and Corporate Affairs Minister Arun Jaitley has said the legislation is still at the drafting stage and could see several ‘corrections’ before its passage,

“The Bill still has to go through the overall drafting process. The Parliamentary committee can offer drafting suggestions. Thereafter it will go back to the Cabinet,” Jaitley said.

“The Cabinet will place the recommendations in the public domain and ask for feedback. So I think a lot of corrections will take place,” the Minister said.

Related Topics:
Continue Reading

Latest business news

Xbox announces 3,200 layoffs as Asha Sharma outlines major restructuring plan

Xbox has announced plans to lay off 3,200 employees over the next year while introducing a major restructuring programme that includes management changes, studio restructuring and cost-cutting measures.

Published

3 weeks ago

on

July 7, 2026

By

XBOX layoff

Xbox has announced plans to reduce its workforce by 3,200 employees, representing around 20 per cent of its total staff, over the coming year as part of a broader restructuring programme linked to Microsoft’s increased investment in artificial intelligence.

According to an email shared with employees by Asha Sharma, the company will begin the process immediately, with 1,600 employees leaving on Monday, while the remaining job reductions will take place during FY27. The company also plans to divest four gaming studios and is preparing to separate from another.

Business reset planned amid financial challenges

In her message to employees, Sharma said the company’s current financial position required significant changes, stating that Xbox’s business was operating at substantially lower margins than comparable platform and publishing companies.

She said the layoffs were not a reflection of employees’ commitment or abilities but were part of a wider effort to strengthen the company’s long-term business.

The workforce reduction comes as Microsoft continues implementing AI-focused cost-cutting measures across its operations. Overall, the technology company is reportedly cutting 4,800 jobs, with Xbox accounting for the largest share.

Sharma also described the gaming sector as experiencing one of its most challenging hardware periods and said the company needed to “reset Xbox” to improve its future performance.

Company to streamline operations and reduce management layers

As part of the restructuring strategy, Xbox plans to simplify its organisational structure, revise its content portfolio and improve platform operations.

According to Sharma, the company currently loses 64 cents for every dollar invested annually, making operational efficiency a key priority.

She said Xbox would increasingly support independent game creators by offering open development tools and broader audience access.

The restructuring will also see Mojang and King report directly to Sharma. She said both studios have evolved into major gaming platforms with large monthly active player bases and will play a central role in Xbox’s future strategy.

To improve decision-making, the company plans to significantly reduce its management hierarchy. Sharma said some departments currently have as many as 14 management layers, which slow down operations. Xbox aims to reduce this to no more than five layers, and in some cases, only three.

The company will also reduce vendor spending by 50 per cent as part of its cost-saving measures.

Helen Chiang promoted to Chief Operating Officer

Alongside the restructuring announcement, Sharma confirmed the promotion of Helen Chiang to the newly created position of Chief Operating Officer.

Chiang will oversee profit and loss responsibilities across Xbox’s content, hardware, platform and services divisions while reporting directly to Sharma.

According to Sharma, the new operating structure is intended to improve investment decisions, strengthen accountability and better integrate the company’s various business units.

Despite the ongoing restructuring and job cuts, Sharma said Xbox remains committed to long-term growth and plans to continue investing heavily in the business, while placing greater emphasis on disciplined spending and strategic priorities.

Continue Reading

India News

Bank holiday today: Are banks open or closed on June 29? Here’s what RBI calendar says

Banks in Himachal Pradesh and Mizoram will remain closed on June 29, 2026, due to regional holidays, while banking operations will continue normally in most other states.

Published

4 weeks ago

on

June 29, 2026

By

Bank Holidays

As June comes to an end, many customers are wondering whether banks across the country are open on June 29, 2026. According to the Reserve Bank of India’s (RBI) holiday calendar, bank operations will not be affected nationwide, but branches in some states will remain closed due to local holidays.

Banks closed in these states on June 29

Banks will remain shut in Himachal Pradesh on Monday, June 29, on account of Sant Guru Kabir Jayanti. In addition, bank branches in Mizoram will remain closed to observe Remna Ni, a regional public holiday.

However, bank branches in most other states and Union Territories are expected to function normally as June 29 is not a nationwide banking holiday.

Will online banking services remain available?

Even when physical branches remain closed, customers can continue using digital banking facilities. Services such as internet banking, mobile banking, UPI transactions, ATM withdrawals and cash deposits at ATMs will remain operational.

Customers planning to visit a bank branch are advised to check with their local branch beforehand, as holiday schedules may vary depending on the state and local observances.

Continue Reading

India News

Union Budget 2026 highlights: Nirmala Sitharaman Raises Capex to Rs 12.2 Lakh Cr, West Bengal Gets Major Allocation

Finance Minister Nirmala Sitharaman is presenting the Union Budget 2026 in Parliament today. Follow this space for live updates, key announcements, and policy insights.

Published

6 months ago

on

February 1, 2026

By

Finance Minister Nirmala Sitharaman arrives to present Union Budget 2026

Finance Minister Nirmala Sitharaman will shortly present the Union Budget 2026 in the Lok Sabha, marking her ninth consecutive Budget. The annual financial statement is expected to outline the government’s policy priorities, reform agenda and spending plans for the coming year. Stay tuned for live updates, key announcements and immediate reactions as the Budget speech unfolds.

Finance Minister Nirmala Sitharaman tabled her ninth Union Budget today, beginning her speech at 11 am.

Nirmala Sitharaman is set to present her ninth Union Budget today, with the finance minister scheduled to begin her speech at 11 am.

Budget 2026 live updates: Presenting the Union Budget for 2026–27, Finance Minister Nirmala Sitharaman said the occasion coincided with Magh Purnima and the birth anniversary of Guru Ravidas. She noted that over the past 12 years, India’s economic journey has been defined by stability, fiscal discipline, sustained growth and moderate inflation.

The budgeted fiscal deficit for fiscal 2026 is estimated at 4.4 per cent of gross domestic product (GDP)

Planned capital expenditure this fiscal year Rs 11.2 lakh crore

Rare earth corrdiors in Odisha and Kerala

Hi-tech tool rooms to be set up by PSUs

Construction equipment scheme to be launched

Container manufacturing scheme for Rs 10,000 crore over 5 years

Rs 10,000 crore SME Growth Fund

Semi-conductor mission to get Rs 40,000 crore

Rs 12.2 lakh crores for infrastructure development

Dedicated RITES to repurpose land of Central PSUs

20 new waterways over next 5 years to be connected

7 high-speed corridors on rail

High-level committee on banking for next phase of Viksit Bharat

Capital expenditure hike of to ₹12.2 lakh crore in Budget 2026, with West Bengal receiving a significant share of allocations.

Mahatma Gandhi Gram Swaraj Initiative aimed at boosting the khadi, handloom, and handicrafts sectors.

High-speed rail corridors: Mumbai-Pune, Pune-Bengaluru, Hyderabad-Bengaluru, Chennai-Bengaluru, Delhi-Varanasi, Varanasi-Siliguri, Pune-Hyderabad

Five university campuses to be established near industrial corridors

Lakpati Didi program expanded in Budget 2026 to reach more beneficiaries across India.

Fiscal deficit for FY26 revised to 4.4%; Budget Estimate for FY27 set at 4.3%.

TCS on overseas tour packages cut to 2% to ease travel costs

Tax holiday to foreign companies that provide cloud services by setting up data centres in India till 2047

17 cancer drugs exempted from import duties

Continue Reading

Trending

© Copyright 2022 APNLIVE.com