Why Corporate Loan Write Offs raise Questions about Fairness for Ordinary Borrowers

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18 Dec 2025

In recent years, several well known corporate loan defaults in India have renewed public debate about fairness in the credit system. Reports from regulatory and investigative agencies have highlighted major cases such as Gitanjali Gems of the Mehul Choksi group, Kingfisher Airlines under Vijay Mallya, REI Agro, Winsome Diamonds, Rotomac Global, Ruchi Soya Industries, and Zoom Developers. These companies account for very large unpaid loans that were later written off by banks during the debt recovery and accounting process. Although a write off does not always mean the borrower is permanently forgiven, it removes the loan from the bank’s active books. Many of these corporate borrowers continue to fight cases through long legal processes, and some remain outside the country. This raises a basic question. Why does the system appear more flexible and more patient with big corporate borrowers while it deals harshly with ordinary citizens? Ordinary people, especially middle class and lower income families, face a very different situation. When they fail to repay a home loan or a small business loan because of job loss, illness or weak economic conditions, the consequences are immediate. Banks send notices, start recovery processes, and finally auction the property. There is practically no room for negotiation or time for recovery. This unequal treatment happens due to several reasons. Small borrowers have to pledge their homes or small assets as security, making it easy for banks to seize and sell them. Ordinary citizens do not have the ability to pursue long court cases or hire expensive lawyers. Large companies have financial and political influence which gives them more negotiating power. Banks also take bigger risks with big companies in the hope of higher returns, but remain strict with small borrowers. There is also a mindset in which corporate failure is seen as a business loss, while the failure of a poor person is seen as personal irresponsibility. The concern is not that corporates get restructuring options. Every economy allows businesses a chance to recover. The real issue is the unequal compassion. If large borrowers can negotiate haircuts, delayed payments or write offs, why cannot small borrowers receive similar support. For a middle class family, losing a home due to a few missed installments is not only a financial loss but a complete personal tragedy. It destroys security, savings and dignity. At the same time, large corporate losses are absorbed quietly into the banking system. India needs a credit environment where accountability and fairness both exist. Banks must disclose more information about large write offs and recovery actions. There should be stronger action against wilful corporate defaulters. Small borrowers should have more flexible repayment options and protection from immediate property auctions, especially in genuine distress. A fair credit culture should not punish the weakest and reward the strongest. A financial system earns trust when it treats all borrowers with equal justice. When large borrowers negotiate soft terms while ordinary people face the harshest penalties, confidence in the system weakens. It is time to rethink not only banking practices but also the moral foundation of economic fairness. (Author is Lecturer in Economics Government Degree College Pouni. Feedback: drahmedtanveer@rediffmail.com)