People are puzzled with what “write off” indicates here. Write off doesn’t indicate Mallya need not return the loan. Write off means that State Bank of India doesn’t assure its investors that it can recover the amount.
Banks give loans to individuals and in some cases, the people don’t return. These loans are classified as “Non-Performing Assets”. A high NPA is negative for a bank and also indicates the bank is unreal. Often times the banks would realize that the debtor would never repay. This purging happens occasionally. In those circumstances, they will take it from their assets. Their assets and value would come down to reality.
While such a thing happens in their balance sheet, the bank’s loan section can keep on to pursue the defaulters if and when they find that the defaulter can afford to pay.
