Few media houses are misleading the people by saying SBI writes off Vijay Mallya’s Loan. What does that really mean?? Let us know the difference between write offs and waive offs first.
Bengaluru – Nov 16, 2016. RedNewswire/-
Bank write offs
Bank write off is the deduction in the value of earnings by the amount of an expense or loss. It is also known as “charge-offs” which means to remove loans from their balance sheets only and reduce their overall tax liability. Write-off does not mean that the loan is waived off, the banks will continue to pursue recovery of the same.
For example – If person ‘X’ takes a loan from from the bank and is unable to pay back the loan to bank or the bank is not able to collect its amount from the loan taker ‘X’. Then the bank will clean up their balance sheet and show that the amount is paid technically in order to achieve taxation efficiency. But that does not mean that bank will not recover its money from ‘X’.
Also Read: True Facts:The capacity of Indian Currency Printing Presses and the replacement time needed
Bank waive offs
Bank waive off is voluntary action of a person that removes that person’s right or particular ability in an agreement. The waiver can either be in written form or some form of action. A waiver essentially removes a real or potential liability for the other party in the agreement.
For example – If a person ‘X’ takes a loan and is unable to pay its loan amount to the bank. Then bank can relinquish its right to pursue any further legal action on the person ‘X’.
You can see the RBI’s Bank write-offs clarification here – https://rbi.org.in/Scripts/rbi_clarification.aspx
As reported by FirstPost, Chair-Managing director of the State Bank of India Arundhati Bhattacharya said, not to write off Rs 7,000 cr loans, will go after wilful defaulters. For more details visit the below mentioned link
The conclusion made is write-off and waive off are not the same. So please do not be misled by media houses.
Please educate people, friends and others and help spread the right information.