Last week, several social media users associated with the opposition parties, especially the Congress party, took to social media to share a post claiming that the State Bank of India has waived off the debt of Rs.12,770 crore given to businessman Gautam Adani for Navi Mumbai’s airport.
Social media users 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.
Sharing an infographic, a social media user Chikku claimed that the Modi government had aided Gautam Adani to become Asia’s wealthiest by looting Indian banks. He insinuated that the government had pressurised SBI to waive off a loan of Rs.12,770 crores given to Adani’s Navi Mumbai airport.
SBI waives Adani’s loan of ₹12,770 cr.
— Chikku (@imChikku_) April 4, 2022
And my ATM charge, SMS charge, Passbook charge total ₹1200/- deducted. pic.twitter.com/7kdTOnteFg
Another social media user, a purported Congress supporter, also peddled the same rhetoric saying that the SBI had written off Rs.12,770 crores debt of Adani for his Navi Mumbai airport. He said the writing-off loan meant that Mumbai airport was gifted to Gautam Adani.
SBI writes off whole 12770Crores debt of Adani for Mumbai Airport, what it means is, Mumbai Airport is gifted to ADANI!
— @Reasonyourself (@Reasonyourself) March 31, 2022
Aparna, another social media user sympathetic to the Congress party, also claimed that individuals defaulting on Rs.6 lakhs loan would be hounded and our property would be taken over, however, for Adani, SBI will fund his business by writing off the loan.
You and me defaulting on a 6 lakh home loan will be hounded, our property will taken over.
— Aparna (@chhuti_is) April 1, 2022
If you’re Adani and want to buy country’s business airport, the buyer will be harassed by agencies. He will be forced to sell you. SBI will fund your dream and then write your loan off. pic.twitter.com/r9xLugQlZG
In a hurry to attack the Modi government and Gautam Adani, the social media users even failed to comprehend the basic difference between waiving off, writing off and underwriting a loan.
For starters, the Congress party followers seem to have no understanding of the difference between writing-off and waiving-off a loan. They use it interchangeably to attack the Modi government often. There is a stark difference between restructuring a loan by ‘writing it’ off and completely ‘waiving off’ a loan given.
Next, they blatantly lie that the Modi government has written off/waived off Rs.12,770 crores of loan taken by Gautam Adani to fund his Navi Mumbai port.
However, the claim made by social media users is outrightly false. The Modi government or the SBI have not waived off/written off any loan given to Gautam Adani.
The news report that the Congress supporters cite is the recent financial agreement between India’s largest bank State Bank of India, and Adani Group’s Navi Mumbai International Airport (NMIAL) to “underwrite” the entire debt requirement of Rs.12,770 crore of the project.
The Adani Group signed a financial closure for the Navi Mumbai International Airport (NMIAL) project by raising a Rs 12,770-crore loan from the State Bank of India (SBI).
So, what does “underwriting” of a loan mean? Is it the same as waiving off/writing off a loan?
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.
This is a prudent and standard procedure undertaken by financial institutions in advanced economies to check the creditworthiness of a debtor. Even in India, it is not uncommon.
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.
