There is huge debate on social media over the news that around Rs. 1,200 crore in dues owed by Mallya’s collapsed Airlines has been labelled a write-off in the books of SBI. Some people are well aware of the term “write-off” and the entire scam. While numerous people are ignorant of the facts and figures. They are adamant to blame the present government for successful escape of Vijay Mallya.

Let’s try to know what is the fact and why around Rs. 1,200 crore in dues owed by Mallya’s collapsed Airlines has been labelled a write-off in the books of SBI?

Let’s first understand what are write-offs?

Write-offs is a unique idea to clear bad loan impacts on balance sheets that is exercised by banks. Banks use the RBI approved tool, Advance Under Collection Accounts (AUCA), in which transfer of accounts to a specific AUCA is an NPA reduction strategy. It is resorted to after exhausting all avenues of recovery, restructuring and compromises. By writing-off bad and doubtful assets, banks can improve NPA ratios through cleansing of the balance sheet and tax benefits. All write-offs, except where one-time settlement or compromises are involved, irrespective of outstanding, should be treated as technical write-offs and parked in AUCA; However, recovery process of these accounts will continue till resolution of these accounts.

Now, what is the case?

Most of the people are unable to understand the difference between Personal & Corporate Loan. They also do not understand how such a huge public money was looted by Vijay Mallya.

Vijay Mallya’s Kingfisher Airlines was given loan of around Rs. 7000 crore by various banks for which Kingfisher provided a pooled collateral security of approx Rs. 5300 crore. This collateral security of Rs. 5300 crore includes Kingfisher House in Mumbai, Kingfisher Villa in Goa, and hypothecation of helicopters that was valued approximately Rs. 250 crores.

The biggest culprit in this scam is valuation of Kingfisher brand to the tune of Rs. 4111 crore by consultancy firm named “Grant Thornton”. This company was also responsible for hypothecation. This is why banks are still struggling to recover the money as Kingfisher as a brand is devalued heavily now. It may have also been done deliberately.

Here is a statement from CBI that was published in Indian Express.

“Lending on the brand value of Kingfisher Airlines is a major concern. We have questioned the banks. It is basically an intangible asset. We are digging into the issue,” said CBI sources.

How come a non-tangible asset can be hypothecated for such a huge loan?


“A CBI probe was initiated after everything was over. In its annual report 2012-2013, Kingfisher Airlines said that at its peak it was the largest airline in India, with a five-star rating from Skytrax. A brand valuation by consultancy firm, Grant Thornton put its value at $550 million (Rs 3,000 crore) on resumption of operations. The airline’s brand had been registered separately from the Kingfisher beer trademark.

The airlines brand name was pledged to 14 lenders, including State Bank of India (SBI), IDBI Bank, Punjab National Bank, Bank of India and Bank of Baroda under a debt recast agreement in which loans valuing Rs 6,500 crore were restructured and converted into equity.”The Indian Express

You cannot spot ICICI, HDFC and other private bank in this list. Actually ICICI offered loan to the tune of Rs. 403 crore but against shares of UB. ICICI recovered this amount by selling it way back in 2012.

Except Axis bank which provided an amount of Rs. 50 crore loan, almost all of them are public sector banks. Surely it cannot be called a coincidence?

There is another fact also. Kingfisher Airlines was grounded in 2012 and banks are on the course of recovery from then on and SBI got in touch with debt recovery tribunal on the day Vijay Mallya left the country with 7 heavy bags. SBI had given enough time for Vijay Mallya to pack his 7 bags full of Indian currency.

For people like you and I, it is next to impossible to get a loan without a tangible asset for even 1 crore but around 6000 crore public money was given casually.

Let’s focus on other facts-

  • Entire loan amount was provided to Vijay Mallya during the tenure of Congress rule.
  • Whether SBI avoided the basic rules knowingly or was forced to do so or some of its officers were corrupt.
  • Technically, extracting money from Vijay Mallya has become next to impossible and that is why SBI is forced to label the loan amount as a write-off.
  • This was either a mistake or another corruption of previous government or it was entire mistake of bank itself.
  • Before present government could take any action Vijay Mallya had packed his luggage to move out of India.
  • Present government and court has tried to force him to surrender but since he is not in Indian border it is hard to grab his collar.
  • Kingfisher Airlines owes a total of Rs 6,963 crore to 17 banks, of which SBI’s loan is Rs 1,201 crore. Recently, an e-auction of Vijay Mallya’s Kingfisher Villa in Goa failed to find any buyer. Sources said that SBICAP Trustee did not get earnest money deposit (EMD) from even a single bidder.
  • He has offered a settlement and has been successful in proving his company bakrupt. Technically, government is forced to listen to him.
  • “Facing questions, government today insisted in Rajya Sabha that State Bank of IndiaBSE 0.18 % had not not waived off Rs 7,000 crore loan, including that of industrialist Vijay Mallya, and asserted that such cases are being pursued.

    Finance Minister Arun Jaitley referred to the Mallya loan issue as a “terrible legacy” which the NDA government had inherited from UPA.”

    -“The government asserted that there had been no waiver of loans extended to the likes of Vijay Mallya’s defunct airline Kingfisher that owes Rs. 7,000 crore to banks, with Finance Minister Arun Jaitley terming the loan as ‘a terrible legacy’ inherited by the NDA from the UPA.

    “Written off does not mean maafi…. It doesn’t mean that the loan ceases to be a loan. We will still chase the loan, the entry in the book changes from being a performing asset to a non-performing asset,” Finance Minister Arun Jaitley said on Wednesday.”

    “This (technical write-off) is merely an accounting entry which results in more focus and more sustained follow-up,” SBI chairperson Arundhati Bhattacharya told The Hindu. “It is a technical entry which is done in order to put it in a separate account where the follow up is more robust. These accounts are only meant for recovery,” she added.

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