On August 6, BJP MP from Pilibhit Varun Gandhi targeted the Centre over ‘written-off loans’ in past five years and sought to confuse it with ‘loan waiver’.
In his tweet, Varun Gandhi wrote, “The House which aspires to get a ‘thank you’ for giving 5 kg ration to the poor says that in 5 years, the loan of corrupt ‘money animals’ up to 10 lakh crore has been waived off. Mehul Choksi and Rishi Aggarwal’s names are on top among those who take ‘Free Ki Rewari’. Who has the first right on the government treasury?”
In December 2020, Rahul Gandhi put out misleading information on the alleged ‘waiving-off’ loans of industrialists by the Modi government. He claimed that Modi government forgave some industrialists by ‘waiving off’ their loans to the tune of Rs 2,37,206 crore. No one knows the source of this figure.
Arvind Kejriwal also claims that the government led by Prime Minister Narendra Modi has been boosting taxes on the poor but waiving them for the rich.
Kejriwal said, “I will tell you who is distributing ‘revadis’ and giving freebies. This waiving of friends’ loans worth thousands of crores and getting contracts worth thousands of crores from foreign tours for friends are giving freebies.”
“Where did all money from the Centre go? They’re forgiving loans of their friends with this govt money. They’ve even forgiven taxes of their billionaire friends”, he asserted.
“If incentives for the poor are ‘revadi’, then what will you call the loan waivers of lakhs and crores of rupees for the corporates,” Bhartiya Tribal Party leader and Gujarat MLA Chhotubhai Vasava said on Twitter.
A difference between Written off and Waived off is being used on purpose to create a confusion in masses against Narendra Modi who has emerged as one of the biggest leader of people who were forgotten.
A few notable works of PM Modi include several game changer schemes like toilets for all, LPG in every kitchen , bank account for all, health for all and tirelessly worked during COVID to provide free rations.
Difference between Written-off and Waived off
A balance sheet should reflect the real position of assets and liabilities. Hence banks have to write off loans given to borrowers, which are “assets” to the banks, which have now shown signs of weakness. If they don’t write off loans, it is like claiming to hold a high quality asset, when actually the quality has deteriorated. Will you trust an entity that doesn’t give the true picture of its assets?
Hence write-offs are a purely technical, accounting entry. Loans, which may not be repaid by the borrower in normal course of business are written off.
Even when these loans are written off, various recovery procedures like recovery suits filed before the DRT/ Court. and action initiated under SARFAESI Act continue. Now, the bank takes control of the assets secured against such loans and sells them off to recover the loans.
When loans are ‘waived’, however, the money lent is gone forever. The Loans have been written off and not waived off as wrongly claimed on purpose by opposition.
Kejriwal and Sanjay Singh attacked the Modi government and the state-run bank State Bank of India for ‘waiving off’ a loan of Rs.12,770 crore given to Gautam Adani’s Navi Mumbai International Airport (NMIAL) project while charging hefty bank charges on ordinary people.
In a hurry to attack the Modi government and Gautam Adani, the opposition even failed to comprehend the basic difference between waiving off, writing off and underwriting a loan.
It’s a blatant lie that Modi government has written off/waived off Rs.12,770 crores of loan taken by Gautam Adani to fund his Navi Mumbai port. The Modi government or the SBI has not waived off/written off any loan given to Gautam Adani.
What does Underwriting of loan means? It is same as Writing off/waive off
No, underwriting a loan by a lender is not the same as waiving off or writing off a loan. The ‘write-off’ is a process of balance sheet cleaning up exercise undertaken by banks to depict the actual status of the bank’s assets and liabilities. The write-offs are not loan waivers, as waiving-off loans mean the borrower is technically exempted from that repayment.
However, underwriting the loan is completely different from the above two.
In financial terms, underwriting a loan means a process used by the lender to decide whether an applicant is creditworthy and should receive a loan. Therefore, an effective underwriting and loan approval process is a key requirement for granting a loan, especially for large-scale projects.
In the process of underwriting, the lender, i.e. SBI in this case, checks for favourable portfolio quality of the loanee, in this case, Adani Group, so that they can check the creditworthiness of the debtor. It is to avoid as many undue risks that arise if the project deems to be a failure.
In this case, Adani Group has finalised an underwriting with the SBI to seek a loan of Rs.12,770 crores for its Navi Mumbai airport project. The agreement has nothing to do with either writing off or waiving the loan. It just means that SBI evaluated the proposal of Adani group, and decided to approve the loan.
As the loan has only been approved by SBI, there is no question of waiving the loan, as Adani group has not defaulted on payments.
Hence, it is outrightly wrong to say that the SBI has written off or waived off a loan of Rs.12,770 crores given to the Adani group.
It is also notable that loan underwriting is different from insurance underwriting, and the SBI-Adani deal is the case of loan underwriting. In insurance underwriting, the insurer accepts a risk for a fee, the insurance premium. But the loan underwriting is simply the process of appraisal of a loan application.
